ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the fiscal year ended December 28, 2017

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition
period from ___________ to ___________

Commission File
Number 1-12604

THE MARCUS CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin

39-1139844

(State or other jurisdiction ofincorporation or organization)

(I.R.S. EmployerIdentification No.)

100 East Wisconsin Avenue, Suite 1900Milwaukee, Wisconsin

53202-4125

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (414) 905-1000

Securities
registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common stock, $1.00 par value

New York Stock Exchange

Securities registered
pursuant to Section 12(g) of the Act:None

Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨

No x

Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨

No x

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to filing requirements for the past 90 days.

Yes x

No ¨

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).

Yes x

No ¨

Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer x

Non-accelerated
filer ¨

Smaller reporting company ¨

(Do not check if a smaller reporting company)

Emerging growth company ¨

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨

No x

The aggregate market
value of the registrant’s common equity held by non-affiliates as of June 29, 2017 was approximately $546,520,582. This value
includes all shares of the registrant’s common stock, except for treasury shares and shares beneficially owned by the registrant’s
directors and executive officers listed in Part I below.

Indicate the number
of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding at February 28, 2018 –
19,381,112

Class B common stock outstanding at February
28, 2018 – 8,525,485

Portions of the registrant’s
definitive Proxy Statement for its 2018 annual meeting of shareholders, which will be filed with the Commission under Regulation
14A within 120 days after the end of our fiscal year, will be incorporated by reference into Part III to the extent indicated
therein upon such filing.

PART I

Special Note Regarding
Forward-Looking Statements

Certain matters
discussed in this Annual Report on Form 10-K and the accompanying annual report to shareholders, particularly in the Shareholders’
Letter and Management’s Discussion and Analysis, are “forward-looking statements” intended to qualify for the
safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements
may generally be identified as such because the context of such statements include words such as we “believe,” “anticipate,”
“expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which may cause
results to differ materially from those expected, including, but not limited to, the following: (1) the availability, in terms
of both quantity and audience appeal, of motion pictures for our theatre division, as well as other industry dynamics such as the
maintenance of a suitable window between the date such motion pictures are released in theatres and the date they are released
to other distribution channels; (2) the effects of adverse economic conditions in our markets, particularly with respect to our
hotels and resorts division; (3) the effects on our occupancy and room rates of the relative industry supply of available
rooms at comparable lodging facilities in our markets; (4) the effects of competitive conditions in our markets; (5) our ability
to achieve expected benefits and performance from our strategic initiatives and acquisitions; (6) the effects of increasing depreciation
expenses, reduced operating profits during major property renovations, impairment losses, and preopening and start-up costs due
to the capital intensive nature of our businesses; (7) the effects of weather conditions, particularly during the winter in
the Midwest and in our other markets; (8) our ability to identify properties to acquire, develop and/or manage and the continuing
availability of funds for such development; (9) the adverse impact on business and consumer spending on travel, leisure and entertainment
resulting from terrorist attacks in the United States or other incidents of violence in public venues such as hotels and movie
theatres; and (10) a disruption in our business and reputational and economic risks associated with civil securities claims brought
by shareholders. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating
the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking
statements made herein are made only as of the date of this Form 10-K and we undertake no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.

Item 1.

Business.

General

We
are engaged primarily in two business segments: movie theatres and hotels and resorts.

As of December 28,
2017, our theatre operations included 69 movie theatres with 895 screens throughout Wisconsin, Illinois, Iowa, Minnesota, Missouri,
Nebraska, North Dakota and Ohio, including two movie theatres with 11 screens in Wisconsin and Nebraska owned by third parties
and managed by us. We also operate a family entertainment center, Funset Boulevard, that is adjacent to one of our theatres
in Appleton, Wisconsin, and own the Ronnie’s Plaza retail outlet in St. Louis, Missouri, an 84,000 square foot retail
center featuring 21 shops and other businesses to which we lease retail space. As of the date of this Annual Report, we are the
4th largest theatre circuit in the United States.

As of December 28,
2017, our hotels and resorts operations included eight wholly-owned or majority-owned and operated hotels and resorts in Wisconsin,
Illinois, Nebraska and Oklahoma. We also managed 10 hotels, resorts and other properties for third parties in Wisconsin, California,
Minnesota, Nevada, North Carolina and Texas. As of December 28, 2017, we owned or managed approximately 4,841 hotel and resort
rooms.

Both
of these business segments are discussed in detail below. For information regarding the revenues, operating income or loss, assets
and certain other financial information of these segments for the last three full fiscal years and for our Transition Period ended
December 31, 2015, please see our Consolidated Financial Statements and the accompanying Note 12 in Part II below.

2

Fiscal
Year

In October 2015,
we elected to change our fiscal year from the last Thursday in May to the last Thursday in December. As a result, on March 15,
2016, we filed a Transition Report on Form 10-K for the transition period beginning on May 29, 2015 and ended December 31, 2015,
which we refer to in this Annual Report as the “Transition Period.” We refer in this Annual Report to the period beginning
on December 30, 2016 and ended December 28, 2017 as “fiscal 2017.” We refer in this Annual Report to the period beginning
on January 1, 2016 and ended December 29, 2016 as “fiscal 2016.” We refer in this Annual Report to the period beginning
on May 30, 2014 and ended on May 28, 2015 as “fiscal 2015,” and the period beginning on May 31, 2013 and ended on May
29, 2014 as “fiscal 2014.” In this Annual Report, we compare (1) audited financial results for fiscal 2017 and fiscal
2016; (2) financial results for fiscal 2016, which are audited, with the financial results for the 53-week period ended December
31, 2015, which are unaudited; (3) financial results for the Transition Period, which are audited, with financial results for the
30-week period ended December 25, 2014, which are unaudited; and (4) as applicable, audited financial results for fiscal 2015 and
fiscal 2014.

Strategic
Plans

Please see our discussion
under “Current Plans” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results
of Operations.

Theatre
Operations

At the end of fiscal
2017, we owned or operated 69 movie theatre locations with a total of 895 screens in Wisconsin, Illinois, Iowa, Minnesota, Missouri,
Nebraska, North Dakota and Ohio. We averaged 13.0 screens per location at the end of fiscal 2017, compared to 13.0 screens per
location at the end of fiscal 2016, 12.6 screens per location at the end of the Transition Period, and 12.4 screens per location
at the end of fiscal 2015. Included in the fiscal 2017, fiscal 2016, Transition Period and fiscal 2015 totals are two theatres
with 11 screens that we manage for other owners. Our 67 company-owned facilities include 47 megaplex theatres (12 or more screens),
representing approximately 80% of our total screens, 19 multiplex theatres (two to 11 screens) and one single-screen theatre. At
the end of fiscal 2017, we operated 866 first-run screens, 11 of which we operated under management contracts, and 29 budget-oriented
screens.

We invested over
$275 million to further enhance the movie-going experience and amenities in new and existing theatres over the last four and one-half
calendar years, with more investments planned for fiscal 2018. These investments include:

New
theatres. Late in our fiscal 2015 fourth quarter, we opened a theatre in Sun Prairie, Wisconsin, the Marcus Palace Cinema.
Replacing an existing nearby theatre in Madison, Wisconsin, this new 12-screen theatre has exceeded our expectations, and we opened
two additional screens at this location during the fourth quarter of fiscal 2016. In April 2017, we opened our new 10-screen Southbridge
Crossing Cinema in Shakopee, Minnesota. This state-of-the-art theatre includes DreamLoungerSM recliner seating in every
auditorium, two UltraScreen DLX® auditoriums, a Zaffiro’s® Express and a Take FiveSM
Lounge. On June 30, 2017, we opened our first stand-alone all in-theatre dining location, branded BistroPlexSM,
in Greendale, Wisconsin. This new theatre features eight in-theatre dining auditoriums with DreamLounger recliners, including
two SuperScreen DLX® auditoriums, plus a separate full-service Take Five Lounge. We have announced plans to
further expand this concept, including a new location in Brookfield, Wisconsin. Construction is expected to begin on this new
location in 2018. In addition, we are looking for additional sites for potential new theatre locations in both new and existing
markets.

3

Theatre
acquisitions. We believe acquisitions of existing theatres or theatre circuits is also a viable growth strategy for us. In
April 2016, we purchased a closed 16-screen theatre in Country Club Hills, Illinois, which is now our sixth theatre in the greater
Chicago area, building on our strong presence in the Chicago southern suburbs. The purchase was part of an Internal Revenue Code
§1031 like-kind exchange in which the tax gain from our October 2015 sale of the real estate related to the Hotel Phillips
was deferred by reinvesting the applicable proceeds in replacement real estate within a prescribed time period. We opened the
newly renovated theatre early in the fourth quarter of fiscal 2016. The renovation added DreamLounger recliner seating to all
auditoriums, added one UltraScreen DLX auditorium and two SuperScreen DLX auditoriums, as well as a Take Five
Lounge and Reel Sizzle® outlet. In December 2016, we acquired the assets of Wehrenberg Theatres® (which we
refer to as Wehrenberg or Marcus Wehrenberg), a family-owned and operated theatre circuit based in St. Louis, Missouri with 197
screens at 14 locations in Missouri, Iowa, Illinois and Minnesota. This acquisition increased our total number of screens by 29%.
The movie theatre industry is very fragmented, with approximately 50% of United States screens owned by the three largest theatre
circuits and the other 50% owned by approximately 800 smaller operators, making it very difficult to predict when acquisition
opportunities may arise. We have engaged third-party assistance to actively help us seek additional acquisitions in the future.
We do not believe that we are geographically constrained, and we believe that we may be able to add value to certain theatres
through our various proprietary amenities and operating expertise.

DreamLounger
recliner additions. These luxurious, state-of-the-art recliners allow guests to go from upright to a full-recline position
in seconds. These seat changes require full auditorium remodels to accommodate the necessary 84 inches of legroom, resulting in
the loss of approximately 50% of the existing traditional seats in an average auditorium. To date, the addition of DreamLoungers
has significantly increased attendance at each of our applicable theatres, outperforming nearby competitive theatres as well as
growing the overall market attendance in most cases. In addition to the two new theatres described above, we added DreamLounger
recliner seats to 15 more theatres during fiscal 2017 (including six Marcus Wehrenberg theatres). As a result, as of December 28,
2017, we offered all DreamLounger recliner seating in 39 theatres, representing approximately 61% of our company-owned, first-run
theatres (including the Marcus Wehrenberg theatres). Including our premium, large format (PLF) auditoriums with recliner seating,
as of December 28, 2017, we offered our DreamLounger recliner seating in approximately 65% of our company-owned, first-run screens
(including the Marcus Wehrenberg screens), a percentage we believe to be the highest among the largest theatre chains in the nation.
Currently, seven Marcus Wehrenberg theatres offer recliner seating in all of its auditoriums. We are currently completing the addition
of DreamLounger recliner seats to three more theatres (including two Marcus Wehrenberg theatres) and evaluating opportunities to
add our DreamLounger premium seating to five to seven additional theatres during the second half of fiscal 2018, including two
Marcus Wehrenberg theatres. As a result, by the end of fiscal 2018, our percentage of total company-owned, first-run screens with
DreamLounger recliner seating may be more than 75%.

UltraScreen
DLX and SuperScreen DLX (DreamLounger eXperience) conversions. We introduced one of the first PLF presentations to
the industry when we rolled out our proprietary UltraScreen® concept in 1999. During fiscal 2014, we introduced our
UltraScreen DLX concept by combining our premium, large-format presentation with DreamLounger recliner seating and Dolby®
Atmos™ immersive sound to elevate the movie-going experience for our guests. During fiscal 2017, we opened two new UltraScreen
DLX auditoriums at our new theatre in Minnesota and two new SuperScreen DLX auditoriums at our new BistroPlex theatre
in Wisconsin, completed conversion of two traditional UltraScreens and one existing Wehrenberg-branded PLF screen to UltraScreen
DLX auditoriums at existing theatres in Wisconsin and Missouri, and converted 16 additional screens to SuperScreen DLX
auditoriums at ten existing theatres in six states (including 11 Marcus Wehrenberg screens). Several of our new PLF screens in
fiscal 2017 included the added feature of heated DreamLounger recliner seats. As of December 28, 2017, we had 28 UltraScreen
DLX auditoriums, one traditional UltraScreen auditorium and 43 SuperScreen DLX auditoriums (a slightly smaller screen
than an UltraScreen but with the same DreamLounger seating and Dolby Atmos sound) at our theatre locations. Three of the
acquired Marcus Wehrenberg theatres feature IMAX® PLF screens. We currently offer at least one PLF screen in approximately
69% of our first-run, company-owned theatres (including the Marcus Wehrenberg theatres) – once again a percentage we believe
to be the highest percentage among the largest theatre chains in the nation. Our PLF screens generally have higher per-screen
revenues and draw customers from a larger geographic region compared to our standard screens, and we charge a premium price to
our guests for this experience. We are currently evaluating opportunities to convert two additional screens at two existing theatres
to UltraScreen DLX and SuperScreen DLX auditoriums during fiscal 2018, in addition to two new UltraScreen
DLX auditoriums planned for a third existing theatre.

4

Signature
cocktail and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres.
We believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage
and expertise that we can leverage to further grow revenues in our theatres. The concepts we are expanding include:

i

Take Five Lounge and Take Five Express – these full-service bars offer an inviting
atmosphere and a chef-inspired dining menu, along with a complete selection of cocktails, locally-brewed beers and wines. We opened
five new Take Five Lounge outlets in fiscal 2017, including two outlets opened at new theatres described above. In addition,
two Marcus Wehrenberg theatres offer a lounge concept, one of which was converted to a Take Five Lounge during fiscal 2017.
As of December 28, 2017, we offered bars at 26 theatres, representing approximately 41% of our company-owned, first-run theatres
(including the Marcus Wehrenberg theatres). We are currently evaluating opportunities to add bar service to additional theatres
during fiscal 2018.

i

Zaffiro’s Express – these outlets offer lobby dining that includes appetizers,
sandwiches, salads, desserts and our signature Zaffiro’s THINCREDIBLE® handmade thin-crust pizza. In select locations
without a Take Five Lounge outlet, we offer beer and wine at the Zaffiro’s Express outlet. We opened four new
Zaffiro’s Express outlets during fiscal 2017, increasing our number of theatres with this concept to 26 as of December
28, 2017, representing approximately 41% of our company-owned, first-run theatres (including the Marcus Wehrenberg theatres). We
also operate three Zaffiro’s Pizzeria and Bar full-service restaurants. We are currently evaluating opportunities
to add two additional Zaffiro’s Express outlets during fiscal 2018.

i

Reel Sizzle – our newest signature dining concept serves menu items inspired by classic
Hollywood and the iconic diners of the 1950s. We offer Americana fare like burgers and chicken sandwiches prepared on a griddle
behind the counter, along with chicken tenders, crinkle cut fries, ice cream and signature shakes. As of December 28, 2017, we
operated seven Reel Sizzle outlets, including two that we opened during fiscal 2017, and we are evaluating additional opportunities
to add Reel Sizzle outlets to existing theatres in the future.

i

We also operate one Hollywood Café at an existing theatre and four of the Marcus
Wehrenberg theatres offer in-lobby dining concepts, operating under names such as Fred’s Drive-In or Five Star.
Including these additional concepts, as of December 28, 2017, we offered one or more in-lobby dining concepts in 36 theatres, representing
approximately 56% of our company-owned, first-run theatres (including the Marcus Wehrenberg theatres).

i

Big Screen Bistro – this concept offers full-service, in-theatre dining with a complete
menu of drinks and chef-prepared salads, sandwiches, entrées and desserts. Including two Marcus Wehrenberg theatres that
had proprietary in-theatre dining concepts converted to Big Screen Bistro concepts during fiscal 2017, one Marcus Wehrenberg
theatre offering in-theatre dining under the name Five Star and the eight-screen new BistroPlex theatre described
above, we currently offer in-theatre dining at ten theatres in 37 total auditoriums (including one theatre and five screens managed
for another owner), representing approximately 14% of our company-owned, first-run theatres (including the Marcus Wehrenberg theatres).
We will continue to evaluate additional opportunities to expand our in-theatre dining concepts in the future.

5

We rolled out a
“$5 Tuesday” promotion at every theatre in our circuit in mid-November 2013. Coupled with a free 44-oz popcorn for
everyone for the first five months of the program (subsequently offered only to our loyalty program members) and an aggressive
marketing campaign, our goal was to increase overall attendance by reaching mid-week value customers who may have reduced their
movie-going frequency or stopped going to the movies because of price. We have seen our Tuesday attendance increase dramatically
since the introduction of the $5 Tuesday promotion. We believe this promotion has created another “weekend” day for
us, without adversely impacting the movie-going habits of our regular weekend customers. The newly-acquired Wehrenberg theatres
previously offered a discounted price on Tuesday nights, but we immediately introduced our $5 Tuesday promotion with the free popcorn
for loyalty members upon acquiring the theatres and have experienced an increase in Tuesday performance at these theatres as a
result. We also offer a “$6 Student Thursday” promotion at 36 locations that has been well received by that particular
customer segment.

We
launched a new, what we believe to be best-in-class, customer loyalty program called Magical Movie RewardsSM on March
30, 2014. Designed to enhance the movie-going experience for our customers, the response to this program has exceeded our expectations.
We currently have approximately 2.6 million members enrolled in the program. Approximately 45% of all transactions in our theatres
during fiscal 2017 were completed by registered members of the loyalty program. The program allows members to earn points for
each dollar spent and access special offers available only to members. The rewards are redeemable at the box office, concession
stand or at the many Marcus Theatres food and beverage venues. In addition, we have partnered with Movio, a global leader in data
analysis for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with
insight into customer preferences, attendance habits and general demographics, which will help us deliver customized communication
to our members. In turn, members of this program can enjoy and plan for a more personalized movie-going experience. The program
also gives us the ability to cost effectively promote non-traditional programming and special events, particularly during non-peak
time periods. We believe that this will result in increased movie-going frequency, more frequent visits to the concession stand,
increased loyalty to Marcus Theatres and ultimately, improved operating results. The acquired Wehrenberg theatres offered a loyalty
program to their customers that had approximately 200,000 members. We converted these members to our Magical Movie Rewards program
during fiscal 2017.

We have enhanced
our mobile ticketing capabilities and added the Magical Movie Rewards loyalty program to our downloadable Marcus Theatres mobile
application. We have redesigned our marcustheatres.com website and continued to install additional theatre-level technology,
such as new ticketing kiosks and digital menu boards and concession advertising monitors. Each of these enhancements is designed
to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices.

The
addition of digital technology throughout our circuit (we offer digital cinema projection on 100% of our first-run screens) has
provided us with additional opportunities to obtain non-motion picture programming from other new and existing content providers,
including live and pre-recorded performances of the Metropolitan Opera, as well as sports, music and other events, at many of
our locations. We offer weekday alternate programming at many of our theatres across our circuit. The special programming includes
classic movies, live performances, comedy shows and children’s performances. We believe this type of programming is more
impactful when presented on the big screen and provides an opportunity to continue to expand our audience base beyond traditional
moviegoers.

6

Revenues for the
theatre business, and the motion picture industry in general, are heavily dependent on the general audience appeal of available
films, together with studio marketing, advertising and support campaigns, factors over which we have no control. Consistent with
prior periods in which blockbusters accounted for a significant portion of our total box office receipts, our top 15 performing
films accounted for 41% of our fiscal 2017 box office receipts, compared to 43% during fiscal 2016. The following five fiscal 2017
films accounted for nearly 20% of our total box office and produced the greatest box office receipts for our circuit: Star Wars:
The Last Jedi, Beauty and the Beast, Guardians of the Galaxy Vol. 2, It and Wonder Woman.

We obtain our films
from several national motion picture production and distribution companies, and we are not dependent on any single motion picture
supplier. Our booking, advertising, concession purchases and promotional activities are handled centrally by our administrative
staff.

We strive to provide
our movie patrons with high-quality picture and sound presentation in clean, comfortable, attractive and contemporary theatre environments.
All of our movie theatre complexes feature digital cinema technology; either digital sound, Dolby or other stereo sound systems;
acoustical ceilings; side wall insulation; engineered drapery folds to eliminate sound imbalance, reverberation and distortion;
tiled floors; cup-holder chair-arms; and computer-controlled heating, air conditioning and ventilation. We offer stadium seating,
a tiered seating system that permits unobstructed viewing, at substantially all of our first-run screens. Computerized box offices
permit all of our movie theatres to sell tickets in advance. Our theatres are accessible to persons with disabilities and provide
wireless headphones for hearing-impaired moviegoers. Other amenities at certain theatres include touch-screen, computerized, self-service
ticket kiosks, which simplify advance ticket purchases. We have an agreement to allow moviegoers to buy tickets on Fandango, the
largest online ticket-seller. We have enhanced our web site and our mobile ticketing capabilities and added the Magical Movie Rewards
loyalty program to our downloadable Marcus Theatres mobile application.

We have a master
license agreement with a subsidiary of Cinedigm Digital Cinema Corp. to deploy digital cinema systems in the majority of our company-owned
theatre locations. Under the terms of the agreement, Cinedigm’s subsidiary purchased the digital projection systems and licensed
them to us under a long-term arrangement. The costs to deploy this new technology are being covered primarily through the payment
of virtual print fees from studios to our selected implementation company, Cinedigm. Our goals from digital cinema included delivering
an improved film presentation to our guests, increasing scheduling flexibility, providing a platform for additional 3D presentations
as needed, as well as maximizing the opportunities for alternate programming that may be available with this technology. As of
December 28, 2017, we had the ability to offer digital 3D presentations in 259, or approximately 31%, of our first-run screens,
including the vast majority of our UltraScreens. We have the ability to increase the number of digital 3D capable screens
we offer to our guests in the future as needed, based on the number of digital 3D films anticipated to be released during future
periods and our customers’ response to these 3D releases.

We sell food and
beverage concessions in all of our movie theatres. We believe that a wide variety of food and beverage items, properly merchandised,
increases concession revenue per patron. Although popcorn and soda remain the traditional favorites with moviegoers, we continue
to upgrade our available concessions by offering varied choices. For example, some of our theatres offer hot dogs, pizza, ice cream,
pretzel bites, frozen yogurt, coffee, mineral water and juices. We have also added self-serve soft drink dispensers and grab-and-go
candy, frozen treat and bottled drink kiosks to many of our theatres. In recent years, we have added signature cocktail and dining
concepts as described above. The response to our new food and beverage offerings has been positive, and we have plans to expand
these food and beverage concepts at additional locations in the future.

We
have a variety of ancillary revenue sources in our theatres, with the largest related to the sale of pre-show and lobby advertising
(through our current advertising provider, Screenvision). We also obtain ancillary revenues from corporate and group meeting sales,
sponsorships, internet surcharge fees and alternate auditorium uses. We continue to pursue additional strategies to increase our
ancillary revenue sources.

In connection with
the Wehrenberg acquisition, we also acquired the Ronnie’s Plaza retail outlet in St. Louis, Missouri, an 84,000 square
foot retail center featuring 21 shops and other businesses to which we lease retail space.

Hotels and Resorts
Operations

Owned and
Operated Hotels and Resorts

The Pfister®
Hotel

We own and operate
The Pfister Hotel, which is located in downtown Milwaukee, Wisconsin. The Pfister Hotel is a full-service luxury hotel and has
307 guest rooms (including 71 luxury suites), two restaurants, three cocktail lounges and a 275-car parking ramp. The Pfister also
has 25,000 square feet of banquet and convention facilities. The Pfister’s banquet and meeting rooms accommodate up to 3,000
people, and the hotel features two large ballrooms, including one of the largest ballrooms in the Milwaukee metropolitan area,
with banquet seating for 900 people. A portion of The Pfister’s first-floor space is leased for retail use. In fiscal 2018,
we will be celebrating The Pfister’s 125th anniversary. In February 2018, The Pfister Hotel earned its 42nd
consecutive AAA Four Diamond Award from the American Automobile Association, which represents every year the award has been in
existence. In October 2017, The Pfister was recognized as a top hotel in the Midwest in Condé Nast Traveler’s
Readers’ Choice Awards. The Pfister Hotel was also named among the top five Best Hotels in Wisconsin by U.S. News &
World Report for 2017. In August 2017, TripAdvisor awarded The Pfister the TripAdvisor® 2017 Certificate of Excellence.
The Pfister is a member of Preferred Hotels and Resorts, an organization of independent luxury hotels and resorts, and Historic
Hotels of America. The Pfister has a signature restaurant named the Mason Street Grill, as well as a state-of-the-art WELL
Spa® + Salon. In May 2013, we completed a renovation of the 23rd floor of this historic hotel that included an exclusive
Pfister VIP Club Lounge and a high-tech executive boardroom. In May 2014, we completed a renovation of the 176-room modern
tower of The Pfister. As part of the renovation, we introduced two new club floors with added personalized conveniences and services
that include access to the new Pfister VIP Club Lounge.

The Hilton
Milwaukee City Center

We own and operate
the 729-room Hilton Milwaukee City Center. Several aspects of Hilton’s franchise program have benefited this hotel, including
Hilton’s international centralized reservation and marketing system, advertising cooperatives and frequent stay programs.
The hotel has two cocktail lounges, three restaurants and an 870-car parking ramp. Directly connected to the Wisconsin Center convention
facility by skywalk, the hotel offers more than 30,000 square feet of meeting and event spaces with state-of-the-art technologies.
In February 2018, the Hilton Milwaukee City Center earned its seventh consecutive AAA Four Diamond Award from the American Automobile
Association. In August 2017, TripAdvisor awarded Hilton Milwaukee City Center the TripAdvisor® 2017 Certificate of Excellence.
In May 2013, we renovated and introduced our first Miller Time® Pub & Grill restaurant at this hotel.

Hilton
Madison at Monona Terrace

We
own and operate the 240-room Hilton Madison at Monona Terrace in Madison, Wisconsin. The Hilton Madison, which also benefits from
the aspects of Hilton’s franchise program noted above, is connected by skywalk to the Monona Terrace Community and Convention
Center, has four meeting rooms totaling 2,400 square feet, an indoor swimming pool, a fitness center, a lounge and a restaurant.
In August 2017, TripAdvisor awarded Hilton Madison at Monona Terrace the TripAdvisor® 2017 Certificate of Excellence. In 2018,
this hotel is scheduled to undergo a complete renovation, including common areas and guestrooms.

8

The Grand
Geneva® Resort & Spa

We own and operate
the Grand Geneva Resort & Spa in Lake Geneva, Wisconsin. This full-facility destination resort is located on 1,300 acres and
includes 355 guest rooms, over 60,000 square feet of banquet, meeting and exhibit space, over 13,000 square feet of ballroom space,
three specialty restaurants, two cocktail lounges, two championship golf courses, a ski hill, indoor and outdoor tennis courts,
three swimming pools, a spa and fitness complex, horse stables and an on-site airport. In February 2018, the Grand Geneva Resort
& Spa earned its 20th consecutive AAA Four Diamond Award from the American Automobile Association. In October 2017,
the Grand Geneva Resort & Spa was recognized as a top resort in the Midwest in Condé Nast Traveler’s Readers’
Choice Awards. Geneva Grand Resort & Spa was also named among the top two Best Hotels in Wisconsin by U.S. News & World
Report for 2017. In August 2017, TripAdvisor awarded the Grand Geneva Resort & Spa the TripAdvisor® 2017 Certificate
of Excellence. In May 2013, we opened an exclusive Geneva Club Lounge as an added amenity for our guests. We opened 29 new
all-season villas at the Grand Geneva Resort & Spa in May 2017.

InterContinental
Milwaukee

We own and operate
the InterContinental Milwaukee in Milwaukee, Wisconsin. The InterContinental Milwaukee has 220 rooms, 12,000 square feet of flexible
banquet and meeting space, on-site parking, a fitness center, a restaurant and a lounge and is located in the heart of Milwaukee’s
theatre and financial district. In January 2018, we announced plans to convert the InterContinental Milwaukee into an independent
arts hotel by mid-2019.

Skirvin
Hilton

We are the principal
equity partner and operator of The Skirvin Hilton hotel in Oklahoma City, Oklahoma, the oldest hotel in Oklahoma. This historic
hotel has 225 rooms, including 20 one-bedroom suites and one Presidential Suite. The Skirvin Hilton benefits from the aspects of
Hilton’s franchise program noted above and has a restaurant, lounge, fitness center, indoor swimming pool, business center
and approximately 18,500 square feet of meeting space. In February 2018, The Skirvin Hilton earned its 11th consecutive
AAA Four Diamond Award from the American Automobile Association. In October 2017, The Skirvin Hilton was recognized as a top hotel
in the Midwest in Condé Nast Traveler’s Readers’ Choice Awards. In fiscal 2016 and fiscal 2017, The Skirvin
Hilton earned recognition as the Best Hotel in Oklahoma City by U.S. News & World Report. In August 2017, TripAdvisor
awarded The Skirvin Hilton the TripAdvisor® 2017 Certificate of Excellence. In January 2017, The Skirvin Hilton was rated #1
of all full-service Hilton Hotels for delivery of brand promise. In September 2016, we completed a $4.3 million renovation project
at The Skirvin Hilton hotel, which included renovations of all guestrooms and public spaces. Our equity interest in this hotel
was 60% as of December 28, 2017.

AC Hotel
Chicago Downtown

Pursuant
to a long-term lease, we operate the AC Hotel Chicago Downtown, a 226-room hotel in Chicago, Illinois. Formerly operated as a
Four Points by Sheraton, during fiscal 2015, we initiated a major renovation and conversion of this hotel, officially opening
it as what was then the fourth AC Hotel by Marriott branded property in the U.S. in June 2015. Located in the heart of Chicago’s
shopping, dining and entertainment district, the AC Hotel by Marriott lifestyle brand targets the millennial traveler searching
for a design-led hotel in a vibrant location with high-quality service. The AC Hotel Chicago Downtown features urban, simplistic
and clean designs with European aesthetics and elegance, the latest technology and communal function spaces. Amenities include
the AC Lounge, a bar area with cocktails, craft beers, wine and tapas, the AC Kitchen, serving a European-inspired breakfast menu,
and the AC Library, a collaborative space with communal tables and self-service business center located just off the main lobby.
The AC Hotel Chicago Downtown also features an indoor swimming pool, fitness room, 3,000 square feet of meeting space and an on-site
parking facility. In August 2017, TripAdvisor awarded the AC Hotel Chicago Downtown the TripAdvisor® 2017 Certificate of Excellence.
Our new SafeHouse® Chicago is in space leased from this hotel and the hotel has additional space leased and available
to be leased to area restaurants.

9

The Lincoln Marriott
Cornhusker Hotel

During the majority
of 2017, we were a 73% majority owner of a joint venture in The Lincoln Marriott Cornhusker Hotel in downtown Lincoln, Nebraska.
In October 2017, we purchased the noncontrolling interest in this joint venture and as a result, we are now the sole owner of this
hotel. The Lincoln Marriott Cornhusker Hotel is a 300-room, full-service hotel with 45,600 square feet of meeting space. The Cornhusker
Office Plaza is a seven-story building with a total of 85,592 square feet of net leasable office space. The office building is
connected to the hotel by a three-story atrium that is used for local events and exhibits. In September 2014, we completed a major
renovation in which we renovated the entire hotel, including the lobby, all guest rooms and meeting space. Also as a part of this
renovation, we opened our second Miller Time Pub & Grill. In November 2014, we were awarded the Business Leadership
Award by The Downtown Lincoln Association, as part of its annual Impact Awards program for recent investment commitments to the
city of Lincoln, Nebraska. In August 2017, TripAdvisor awarded The Lincoln Marriott Cornhusker Hotel the TripAdvisor® 2017
Certificate of Excellence.

Managed Hotels,
Resorts and Other Properties

We also manage hotels,
resorts and other properties for third parties, typically under long-term management agreements. Revenues from these management
contracts may include both base management fees, often in the form of a fixed percentage of defined revenues, and incentive management
fees, typically calculated based upon defined profit performance. We may also earn fees for technical and preopening services before
a property opens, as well as for ongoing accounting and technology services.

We manage the Crowne
Plaza-Northstar Hotel in Minneapolis, Minnesota. The Crowne Plaza-Northstar Hotel is located in downtown Minneapolis and has 222
guest rooms, 12 meeting rooms, 10,000 square feet of meeting space, an outdoor Skygarden for group events, a restaurant, a cocktail
lounge and an exercise facility.

We manage The Garland
hotel in North Hollywood, California. The Garland hotel has 255 recently renovated guest rooms, including 12 suites, meeting space
for up to 600, including an amphitheater and ballroom, an outdoor swimming pool and lighted tennis courts. The mission-style hotel
is located on seven acres near Universal Studios. In August 2017, TripAdvisor awarded The Garland the TripAdvisor® 2017 Certificate
of Excellence. In October 2017, The Garland was recognized as a top hotel in Los Angeles in Condé Nast Traveler’s
Readers’ Choice Awards.

We also provide
hospitality management services, including check-in, housekeeping and maintenance, for a vacation ownership development adjacent
to the Grand Geneva Resort & Spa owned by Orange Lake Resort & Country Club of Orlando, Florida. The development includes
68 two-room timeshare units (136 rooms) and a timeshare sales center.

We manage the Hilton
Garden Inn Houston NW/Chateau in Houston, Texas. The Hilton Garden Inn Houston NW/Chateau has 171 guest rooms, a ballroom, a restaurant,
a fitness center, a convenience mart and a swimming pool. The hotel is a part of Chateau Court, a 13-acre, European-style mixed-use
development that also includes retail space and an office village. In August 2017, TripAdvisor awarded Hilton Garden Inn Houston
NW/Chateau the TripAdvisor® 2017 Certificate of Excellence.

We manage the Hilton
Minneapolis/Bloomington in Bloomington, Minnesota. This “business class” hotel offers 257 rooms, an indoor swimming
pool, a club level, a fitness center, a business center and 9,217 square feet of meeting space. We completed a $2 million renovation
of the Hilton Minneapolis/Bloomington in April 2016. The renovation included renovations of the lobby area and entrance, food and
beverage outlets, meeting spaces and the HHonors Executive Lounge. In August 2017, TripAdvisor awarded Hilton Minneapolis/Bloomington
the TripAdvisor® 2017 Certificate of Excellence.

10

We manage the Heidel
House Resort & Spa in Green Lake, Wisconsin. The resort features 190 full-service rooms and is located on 20 wooded acres on
the shore of Green Lake, near Ripon, Wisconsin. The resort has an award-winning spa, three restaurants, two lounges, an ice cream
parlor, a 380-guest ballroom, an outdoor space for weddings, indoor and outdoor pools, a beach, a boat rental area, hiking and
biking trails, as well as a yacht available for daily excursions. Wisconsin Meetings magazine voted Heidel House Resort & Spa among the Best Wisconsin Conference Centers for 2017. Spas of America ranked Evensong Spa one of the Top 100 Spas
of 2017.

In 2015, we became
a 10% minority investor and manager of the new Omaha Marriott Downtown at The Capitol District hotel, which opened in August 2017.
The 333-room, 12-story full service hotel serves as an anchor for the Capitol District, an upscale urban destination dining and
entertainment community in downtown Omaha. The development also includes 218 luxury residential apartments, office space, a parking
garage and retail space for restaurants, shops and entertainment. It also features a plaza for events and concerts.

In September 2017,
we assumed management of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina. The Sheraton Chapel Hill Hotel is located
in the Triangle region of North Carolina and features 168 guestrooms and suites, 16,000 square feet of flexible meeting space,
an on-site restaurant, fitness center, seasonal outdoor pool and sun deck and local shuttle service.

In January 2018,
we assumed management of the newly-opened Murieta Inn and Spa in Rancho Murieta, California. Found within the development containing
the renowned Murieta Equestrian Center, the largest equestrian facility in California, the 83-room hotel features The Gate, a one-of-a-kind
restaurant and bar that offers fresh, seasonal menus using ingredients from the hotel’s five-acre farm and state-of-the-art
greenhouse. In addition to a remarkable “farm-to-fork” experience, guests can also enjoy wine from the burgeoning foothills’
wine country. The hotel has an inviting resort-style pool and lavish hot tub adjacent to a private one-acre park overlooking the
Cosumnes River. Guests can also relax at The Cupola, a luxury salon and day spa that will open in April 2018. The Murieta Inn and
Spa also offers up to 15,000 square feet of indoor and outdoor meeting and event space, with advanced technologies such as Fiber
Speed WiFi and Staycast capabilities and a dedicated coordinator assigned to every event.

We also manage two
condominium hotels under long-term management contracts. Revenues from these management contracts are larger than typical management
contracts because, under an agreed-upon rental pool arrangement, room revenues are shared at a defined percentage with individual
condominium owners. In addition, we own all of the common areas of these facilities, including all restaurants, lounges, spas and
gift shops, and retain all of the revenues from these outlets.

We manage the Timber
Ridge Lodge, an indoor/outdoor water park and condominium complex in Lake Geneva, Wisconsin. The Timber Ridge Lodge is a 225-unit
condominium hotel on the same campus as the Grand Geneva Resort & Spa. The Timber Ridge Lodge has meeting rooms totaling 3,640
square feet, a general store, a restaurant-cafe, a snack bar and lounge, a state-of-the-art fitness center and an entertainment
arcade. In August 2017, TripAdvisor awarded the Timber Ridge Lodge the TripAdvisor® 2017 Certificate of Excellence.

We manage the Platinum
Hotel & Spa, a condominium hotel in Las Vegas, Nevada just off the Las Vegas Strip, and own the hotel’s public space.
The Platinum Hotel & Spa has 255 one and two-bedroom suites. This non-gaming, non-smoking hotel also has an on-site restaurant,
lounge, spa/salon and 14,897 square feet of meeting space, including 6,336 square feet of outdoor space. In August 2017, TripAdvisor
awarded the Platinum Hotel & Spa the TripAdvisor® 2017 Certificate of Excellence. We own 16 previously unsold condominium
units at the Platinum Hotel & Spa.

During fiscal 2017,
we ceased management of the Sheraton Madison Hotel in Madison, Wisconsin and sold our 15% minority equity interest in the property.
During fiscal 2017, we also ceased management of The Westin® Atlanta Perimeter North in Atlanta, Georgia and sold our 11% minority
interest in that property.

11

During fiscal 2016,
we ceased management of The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida and sold all but 0.49% of our 10% minority
ownership interest in the property. We have agreed to sell the remaining interest during the next several years.

In June 2015, we
purchased the SafeHouse in Milwaukee, Wisconsin, adding another restaurant to our portfolio. The SafeHouse is an
iconic, spy-themed restaurant and bar that has operated in Milwaukee for 50 years. We completed a significant renovation of the
SafeHouse in 2016. We opened a new SafeHouse location in Chicago, Illinois in March 2017 and also opened the EscapeHouse
Chicago, a complimentary business capitalizing on the popularity of team escape games.

In December 2016,
we announced that our Wisconsin Hospitality Linen Service (WHLS) business unit completed a $2.3 million expansion. WHLS provides
commercial laundry services for our hotel and resort properties in Wisconsin and for other unaffiliated hotels in the Midwest.
WHLS currently processes over 10 million pounds of linen each year, and the expansion is expected to enable WHLS to double its
current capacity within the next five years. WHLS has been a leader in commercial laundry services for the hospitality industry
in the Midwest for over 20 years.

In October 2015,
we completed the sale of the Hotel Phillips, a 217-room historic, landmark hotel in Kansas City, Missouri, which we had previously
successfully owned and operated for 14 years.

In 2017, we were
awarded the Service Excellence Award by Governor Scott Walker at the Wisconsin Governor’s Conference on Tourism, which took
place March 12-14, 2017 in Milwaukee, Wisconsin. The Service Excellence Award honors a Wisconsin business that has
achieved significant success and growth by providing exceptional service to its customers and a strong, charitable involvement
in its community. Marcus Hotels & Resorts received the award for its ongoing commitment to supporting Wisconsin charities and
tourism-driven amenities. Last year, associates of The Marcus Corporation and Marcus Hotels & Resorts volunteered more than
28,000 hours in their local communities.

We have taken our
highly-regarded web development team and created a new business unit to be managed by the hotels and resorts division called Graydient
Creative. Graydient leverages our expertise in digital marketing, creating a new profit center for the division by seeking new
external customers. Services provided by Graydient include, but are not limited to, website design and development, branding and
print design, and social media management.

Competition

Both of our businesses
experience intense competition from national, regional and local chain and franchise operations, some of which have substantially
greater financial and marketing resources than we have. Most of our facilities are located in close proximity to competing
facilities.

Our movie theatres
compete with large national movie theatre operators, such as AMC Entertainment, Cinemark and Regal Cinemas, as well as with a
wide array of smaller first-run exhibitors. Movie exhibitors also face competition from a number
of other movie exhibition delivery systems, such as digital downloads, video-on-demand, pay-per-view television, DVDs and network
and syndicated television. We also face competition from other forms of entertainment competing for the public’s leisure
time and disposable income.

Our hotels and resorts
compete with the hotels and resorts operated and/or franchised by Hyatt Corporation, Marriott Corporation, Hilton Worldwide and
others, along with other regional and local hotels and resorts. Increasingly, we also face competition
from new channels of distribution in the travel industry, such as peer-to-peer inventory sources that allow travelers to book stays
on websites that facilitate short-term rental of homes and apartments from owners, thereby providing an alternative to hotel rooms,
such as Airbnb and HomeAway. We compete for hotel management agreements with a wide variety of national, regional and local
management companies based upon many factors, including the value and quality of our management services, our reputation, our ability
and willingness to invest our capital in joint venture projects, the level of our management fees and our relationships with property
owners and investors.

We believe that the
principal factors of competition in both of our businesses, in varying degrees, are the price and quality of the product, quality
and location of our facilities and customer service. We believe that we are well positioned to compete on the basis of these
factors.

12

Seasonality

Due to our change
to a December fiscal year end, we expect our quarterly results to be more consistent between quarters than they were in the past
and our results for the last two years under the new calendar have met those expectations. Our first fiscal quarter will likely
produce the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during
the winter months. We expect our second and third fiscal quarters to often produce our strongest operating results because these
periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business.
Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year
for our theatre division, we expect that the specific timing of the last Thursday in December will have an impact on the results
of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

Environmental
Regulation

Federal, state and
local environmental legislation has not had a material effect on our capital expenditures, earnings or competitive position. However,
our activities in acquiring and selling real estate for business development purposes have been complicated by the continued emphasis
that our personnel must place on properly analyzing real estate sites for potential environmental problems. This circumstance has
resulted in, and is expected to continue to result in, greater time and increased costs involved in acquiring and selling properties
associated with our various businesses.

Employees

As of December 28,
2017, we had approximately 7,800 employees, approximately 59% of whom were employed on a variable or part-time basis. A number
of our (1) hotel employees at the Crowne Plaza Northstar in Minneapolis, Minnesota are covered by a collective bargaining
agreement that expires on April 30, 2019; (2) operating engineers at The Pfister Hotel and the Hilton Milwaukee City
Center are covered by collective bargaining agreements that expire on April 30, 2020 and December 31, 2019, respectively; (3) hotel
employees at the Hilton Milwaukee City Center and The Pfister Hotel are covered by a collective bargaining agreement that expires
on February 14, 2019; and (4) painters in the Hilton Milwaukee City Center and The Pfister Hotel are covered by a collective bargaining
agreement that expires on May 31, 2018.

As of the end of
fiscal 2017, approximately 7% of our employees were covered by a collective bargaining agreement, of which approximately 1% were
covered by an agreement that will expire within one year.

Website
Information and Other Access to Corporate Documents

Our corporate website
is www.marcuscorp.com. All of our Form 10-Ks, Form 10-Qs and Form 8-Ks, and amendments thereto, are available on this website as
soon as practicable after they have been filed with the SEC. We are not including the information contained on our website as part
of, or incorporating it by reference into, this Annual Report. In addition, our corporate governance guidelines and the charters
for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are available on our website.
If you would like us to mail you a copy of our corporate governance guidelines or a committee charter, please contact Thomas F.
Kissinger, Senior Executive Vice President, General Counsel and Secretary, The Marcus Corporation, 100 East Wisconsin Avenue, Suite
1900, Milwaukee, Wisconsin 53202-4125.

13

Item 1A.

Risk Factors.

The
following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks
and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us
or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business,
financial condition, operating results, and cash flows could be materially adversely affected.

The Lack of Both the
Quantity and Audience Appeal of Motion Pictures May Adversely Affect Our Financial Results.

The financial results
of our movie theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of
available films, together with studio marketing, advertising and support campaigns, factors over which we have no control. The
relative success of our movie theatre business will continue to be largely dependent upon the quantity and audience appeal of films
made available by the movie studios and other producers. Poor performance of films, a disruption in the production of films due
to events such as a strike by actors, writers or directors, or a reduction in the marketing efforts of the film distributors to
promote their films could have an adverse impact on our business and results of operations. Also, our quarterly results of operations
are significantly dependent on the quantity and audience appeal of films that we exhibit during each quarter. As a result, our
quarterly results may be unpredictable and somewhat volatile.

Our Financial Results
May be Adversely Impacted by Unique Factors Affecting the Theatre Exhibition Industry, Such as the Shrinking Video Release Window,
the Increasing Piracy of Feature Films and the Increasing Use of Alternative Film Distribution Channels and Other Competing Forms
of Entertainment.

Over the last decade,
the average video release window, which represents the time that elapses from the date of a film’s theatrical release to
the date a film is released to other channels, including video on-demand (VOD) and DVD, has decreased from approximately six months
to less than four months. Many current films are now released to ancillary markets within 75-90 days, and more than one studio
has been discussing their interest in creating a new, shorter premium VOD window. We can provide no assurance that these release
windows, which are determined by the film studios, will not shrink further, which could have an adverse impact on our movie theatre
business and results of operations.

Piracy of motion
pictures is prevalent in many parts of the world. Technological advances allowing the unauthorized dissemination of motion pictures
increase the threat of piracy by making it easier to create, transmit and distribute high quality unauthorized copies of such motion
pictures. The proliferation of unauthorized copies and piracy of motion pictures may have an adverse effect on our movie theatre
business and results of operations.

We
face competition for movie theatre patrons from a number of alternative motion picture distribution channels, such as DVD, network,
cable and satellite television, video on-demand, pay-per-view television and downloading utilizing the internet. Periodically,
internet ticketing intermediaries introduce services and products with the stated intention of increasing movie-going frequency.
The actual impact these services and products may have on our relationship with the customer and our results of operations is
unknown at this time. We also compete with other forms of entertainment competing for our patrons’ leisure time and disposable
income such as concerts, amusement parks, sporting events, home entertainment systems, video games and portable entertainment
devices such as MP3 players, tablet computers and smart phones. An increase in popularity of these alternative film distribution
channels and competing forms of entertainment may have an adverse effect on our movie theatre business and results of operations.

14

A Deterioration
in Relationships with Film Distributors Could Adversely Affect Our Ability to Obtain Commercially Successful Films or Increase
Our Costs to Obtain Such Films.

We rely on the film
distributors for the motion pictures shown in our theatres. Our business depends to a significant degree on maintaining good relationships
with these distributors. Deterioration in our relationships with any of the major film distributors could adversely affect our
access to commercially successful films or increase our costs to obtain such films and adversely affect our business and results
of operations. Because the distribution of motion pictures is in large part regulated by federal and state antitrust laws and has
been the subject of numerous antitrust cases, we cannot ensure a supply of motion pictures by entering into long-term arrangements
with major distributors. Rather, we must compete for licenses on a film-by-film and theatre-by-theatre basis and are required to
negotiate licenses for each film and for each theatre individually. We are periodically subject to audits on behalf of the film
distributors to ensure that we are complying with the applicable license agreements.

Historically, a
material increase in the supply of new hotel rooms in a market can destabilize that market and cause existing hotels to experience
decreasing occupancy, room rates and profitability. If such over-supply occurs in one or more of our major markets, we may experience
an adverse effect on our hotels and resorts business and results of operations.

Downturns or adverse
economic conditions affecting the United States economy generally, and particularly downturns or adverse economic conditions in
the Midwest and in our other markets, adversely affect our results of operations, particularly with respect to our hotels and resorts
division. Poor economic conditions can significantly adversely affect the business and group travel customers, which are the largest
customer segments for our hotels and resorts division. Specific economic conditions that may directly impact travel, including
financial instability of air carriers and increases in gas and other fuel prices, may adversely affect our results of operations.
Additionally, although our theatre business has historically performed well during economic downturns as consumers seek less expensive
forms of out-of-home entertainment, a significant reduction in consumer confidence or disposable income in general may temporarily
affect the demand for motion pictures or severely impact the motion picture production industry, which, in turn, may adversely
affect our results of operations.

If the Amount of Sales
Made Through Third-Party Internet Travel Intermediaries Increases Significantly, Consumer Loyalty to Our Hotels Could Decrease
and Our Revenues Could Fall.

We
expect to derive most of our business from traditional channels of distribution. However, consumers now use internet travel intermediaries
regularly. Some of these intermediaries are attempting to increase the importance of price and general indicators of quality (such
as “four-star downtown hotel”) at the expense of brand/hotel identification. These agencies hope that consumers will
eventually develop brand loyalties to their reservation system rather than to our hotels. If the amount of sales made through
internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries rather
than to our hotels, we may experience an adverse effect on our hotels and resorts business and results of operations.

15

Each of Our Business
Segments and Properties Experience Ongoing Intense Competition.

In each of our businesses
we experience intense competition from national, regional and local chain and franchise operations, some of which have substantially
greater financial and marketing resources than we have. Most of our facilities are located in close proximity to other facilities
which compete directly with ours. The motion picture exhibition industry is fragmented and highly competitive with no significant
barriers to entry. Theatres operated by national and regional circuits and by small independent exhibitors compete with our theatres,
particularly with respect to film licensing, attracting patrons and developing new theatre sites. Moviegoers are generally not
brand conscious and usually choose a theatre based on its location, its selection of films and its amenities. With respect to our
hotels and resorts division, our ability to remain competitive and to attract and retain business and leisure travelers depends
on our success in distinguishing the quality, value and efficiency of our lodging products and services from those offered by others.
If we are unable to compete successfully in either of our divisions, this could adversely affect our results of operations.

We May Not Achieve
the Expected Benefits and Performance of Our Strategic Initiatives and Acquisitions.

Our key strategic
initiatives in our theatre and hotels and resorts divisions often require significant capital expenditures to implement. We expect
to benefit from revenue enhancements and/or cost savings as a result of these initiatives. However, there can be no assurance that
we will be able to generate sufficient cash flow from these initiatives to provide the return on investment we anticipated from
the required capital expenditures.

There also can be
no assurance that we will be able to generate sufficient cash flow to realize anticipated benefits from any strategic acquisitions
that we may enter into. Although we have a history of successfully integrating acquisitions into our existing theatre and hotels
and resorts businesses, any acquisition may involve operating risks, such as (1) the difficulty of assimilating and integrating
the acquired operations and personnel into our current business; (2) the potential disruption of our ongoing business; (3) the
diversion of management’s attention and other resources; (4) the possible inability of management to maintain uniform standards,
controls, policies and procedures; (5) the risks of entering markets in which we have little or no expertise; (6) the potential
impairment of relationships with employees; (7) the possibility that any liabilities we may incur or assume may prove to be more
burdensome than anticipated; and (8) the possibility the acquired property or properties do not perform as expected.

Both our movie theatre
and hotels and resorts businesses are heavily capital intensive. Purchasing properties and buildings, constructing buildings, renovating
and remodeling buildings and investing in joint venture projects all require substantial upfront cash investments before these
properties, facilities and joint ventures can generate sufficient revenues to pay for the upfront costs and positively contribute
to our profitability. In addition, many growth opportunities, particularly for our hotels and resorts division, require lengthy
development periods during which significant capital is committed and preopening costs and early start-up losses are incurred.
We expense these preopening and start-up costs currently. As a result, our results of operations may be adversely affected by our
significant levels of capital investments. Additionally, to the extent we capitalize our capital expenditures, our depreciation
expenses may increase, thereby adversely affecting our results of operations.

We periodically
consider whether indicators of impairment of long-lived assets held for use are present. Demographic changes, economic conditions
and competitive pressures may cause some of our properties to become unprofitable. Deterioration in the performance of our properties
could require us to recognize impairment losses, thereby adversely affecting our results of operations.

A portion of our
ability to successfully achieve our growth objectives in both our theatre and hotels and resorts divisions is dependent upon our
ability to successfully identify suitable properties to acquire, develop and manage. Failure to successfully identify, acquire
and develop suitable and successful locations for new lodging properties and theatres will substantially limit our ability to achieve
these important growth objectives.

In addition to acquiring
or developing hotels and resorts or entering into management contracts to operate hotels and resorts for other owners, we have
from time to time invested, and expect to continue to invest, as a joint venture partner. We have also indicated that we may act
as an investment fund sponsor in order to acquire additional hotel properties. A portion of our ability to successfully achieve
our growth objectives in our hotels and resorts division is dependent upon our ability to successfully identify suitable joint
venture partners or raise equity funds to acquire, develop and manage hotels and resorts. Failure to successfully identify suitable
joint venture partners or raise equity for an investment fund will substantially limit our ability to achieve these important growth
objectives.

Adverse Economic Conditions,
Including Disruptions in the Financial Markets, May Adversely Affect Our Ability to Obtain Financing on Reasonable and Acceptable
Terms, if at All, and Impact Our Ability to Achieve Certain of Our Growth Objectives.

We expect that we
will require additional financing over time, the amount of which will depend upon a number of factors, including the number of
theatres and hotels and resorts we acquire and/or develop, the amount of capital required to refurbish and improve existing properties,
the amount of existing indebtedness that requires repayment in a given year and the cash flow generated by our businesses. Downturns
or adverse economic conditions affecting the United States economy generally, and the United States stock and credit markets specifically,
may adversely impact our ability to obtain additional short-term and long-term financing on reasonable terms or at all, which would
negatively impact our liquidity and financial condition. As a result, a prolonged downturn in the stock or credit markets would
also limit our ability to achieve our growth objectives.

Joint venture partners
may have shared control or disproportionate control over the operation of our joint venture assets. Therefore, our joint venture
investments may involve risks such as the possibility that our joint venture partner in an investment might become bankrupt or
not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent
with our business interests or goals, or be in a position to take action contrary to our instructions or requests or contrary to
our policies or objectives. Consequently, actions by our joint venture partners might subject hotels and resorts owned by the joint
venture to additional risk. Further, we may be unable to take action without the approval of our joint venture partners. Alternatively,
our joint venture partners could take actions binding on the joint venture without our consent.

Our Properties are
Subject to Risks Relating to Acts of God, Terrorist Activity and War and Any Such Event May Adversely Affect Our Financial Results.

Acts
of God, natural disasters, war (including the potential for war), terrorist activity (including threats of terrorist activity),
incidents of violence in public venues such as hotels and movie theatres, epidemics (such as SARs, bird flu and swine flu), travel-related
accidents, as well as political unrest and other forms of civil strife and geopolitical uncertainty may adversely affect the lodging
and movie exhibition industries and our results of operations. Terrorism or other similar incidents may significantly impact business
and leisure travel or consumer choices regarding out-of-home entertainment options and consequently demand for hotel rooms or
movie theatre attendance may suffer. In addition, inadequate preparedness, contingency planning, insurance coverage or recovery
capability in relation to a major incident or crisis may prevent operational continuity and consequently impact the reputation
of our businesses.

17

Failure to Protect
Our Information Systems and Other Confidential Information Against Cyber Attacks or Other Information Security Breaches Could
Have a Material Adverse Effect on Our Business.

Information security
risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication
and activities of perpetrators of cyber attacks. A failure in or breach of our information systems or other confidential information
as a result of cyber attacks or other information security breaches could disrupt our business, result in the disclosure or misuse
of confidential or proprietary information, damage our reputation, expose us to litigation, increase our costs or cause losses.
As cyber and other threats continue to evolve, we may be required to expend additional resources to continue to enhance our information
security measures or to investigate and remediate any information security vulnerabilities.

We are Subject to Substantial
Government Regulation, Which Could Entail Significant Cost.

We are subject to
various federal, state and local laws, regulations and administrative practices affecting our business, and we must comply with
provisions regulating health and sanitation standards, equal employment, environmental, and licensing for the sale of food and
alcoholic beverages. Our properties must also comply with Title III of the Americans with Disabilities Act of 1990, or ADA. Compliance
with the ADA requires that public accommodations "reasonably accommodate" individuals with disabilities and that new
construction or alterations made to "commercial facilities" conform to accessibility guidelines unless "structurally
impracticable" for new construction or technically infeasible for alterations. Non-compliance with the ADA could result in
the imposition of injunctive relief, fines or an award of damages to private litigants or additional capital expenditures to remedy
such noncompliance. Changes in existing laws or implementation of new laws, regulations and practices could also have a significant
impact on our business. For example, a significant portion of our staff level employees are part time workers who are paid at or
near the applicable minimum wage in the relevant jurisdiction. Increases in the minimum wage and implementation of reforms requiring
the provision of additional benefits would increase our labor costs.

Our Business and Operations
Could be Negatively Affected if We Become Subject to Any Securities Litigation or Shareholder Activism, Which Could Cause Us to
Incur Significant Expense, Hinder Execution of Investment Strategy and Impact our Stock Price.

While we are currently
not subject to any securities litigation or shareholder activism, due to the potential volatility of our stock price and for a
variety of other reasons, we may in the future become the target of securities litigation or shareholder activism. Securities litigation
and shareholder activism, including potential proxy contests, could result in substantial costs and divert the attention of our
management and board of directors and resources from our business. Additionally, such securities litigation and shareholder activism
could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make
it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other
expenses related to any securities litigation or activist shareholder matters. Further, our stock price could be subject to significant
fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation or shareholder
activism.

Adverse Weather Conditions,
Particularly During the Winter in the Midwest and in Our Other Markets, May Adversely Affect Our Financial Results.

Poor weather conditions
adversely affect business and leisure travel plans, which directly impacts our hotels and resorts division. In addition, theatre
attendance on any given day may be negatively impacted by adverse weather conditions. In particular, adverse weather during peak
movie-going weekends or holiday periods may negatively affect our results of operations. Adverse winter weather conditions may
also increase our snow removal and other maintenance costs in both of our divisions.

18

Our Results May be
Seasonal, Resulting in Unpredictable and Varied Quarterly Results.

Due to our change
to a December fiscal year-end, we expect our quarterly results to be more consistent between quarters than they were in the past
and our results for the last two years under the new calendar have met those expectations. Our first fiscal quarter will likely
produce the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during
the winter months. We expect our second and third fiscal quarters to often produce our strongest operating results because these
periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business.
Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year
for our theatre division, we expect that the specific timing of the last Thursday in December will have an impact on the results
of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

Item 1B.

Unresolved Staff Comments.

None.

Item 2.

Properties.

We own the real
estate of a substantial portion of our facilities, including, as of December 28, 2017, The Pfister Hotel, the Hilton Milwaukee
City Center, the Hilton Madison at Monona Terrace, the Grand Geneva Resort & Spa, the InterContinental Milwaukee, The Lincoln
Marriott Cornhusker Hotel, The Skirvin Hilton (majority ownership), and the majority of our theatres. We lease the remainder of
our facilities. As of December 28, 2017, we also managed one hotel for a joint venture in which we have a minority interest and
nine hotels, resorts and other properties and two theatres that are owned by third parties. Additionally, we own properties acquired
for the future construction and operation of new facilities. All of our properties are suitably maintained and adequately utilized
to cover the respective business segment served.

19

Our owned, leased
and managed properties are summarized, as of December 28, 2017, in the following table:

Business Segment

Total Number of Facilities in Operation

Owned(1)

Leased from UnrelatedParties(2)

Managed for Related Parties

Managed for UnrelatedParties(2)

Theatres:

Movie Theatres

69

52

15

0

2

Family Entertainment Center

1

1

0

0

0

Other Properties(3)

1

1

0

0

0

Hotels and Resorts:

Hotels

15

6

1

1

7

Resorts

2

1

0

0

1

Other Properties(4)

3

0

2

0

1

Total

91

61

18

1

11

(1)

Six of the movie theatres are on land leased from unrelated
parties. One of the hotels is owned by a joint venture in which we are the principal equity partner (60% as of December 28, 2017).

(2)

The 15 theatres leased from unrelated parties have a total
of 183 screens, and the two theatres managed for unrelated parties have a total of 11 screens. One UltraScreen adjacent
to an owned theatre is leased from an unrelated party.

Includes a vacation ownership development adjacent to the
Grand Geneva Resort & Spa owned by Orange Lake Resort & Country Club of Orlando, Florida for which we provide hospitality
management services and two SafeHouse restaurants located in Milwaukee, Wisconsin and Chicago, Illinois, both of which
we lease from an unrelated party and which are managed by our hotels and resorts division.

Certain of the individual
properties or facilities identified above are subject to purchase money or construction mortgages or commercial lease financing
arrangements, but we do not consider these encumbrances, individually or in the aggregate, to be material.

All of our operating
property leases expire on various dates after the end of fiscal 2018 (assuming we exercise all of our renewal and extension options).

Item 3.

Legal Proceedings.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

20

EXECUTIVE OFFICERS OF THE COMPANY

Each of our executive
officers is identified below together with information about each officer’s age, position and employment history for at least
the past five years:

Name

Position

Age

Stephen H. Marcus

Chairman of the Board

82

Gregory S. Marcus

President and Chief Executive Officer

53

Thomas F. Kissinger

Senior Executive Vice President, General Counsel and Secretary

57

Douglas A. Neis

Chief Financial Officer and Treasurer

59

Rolando B. Rodriguez

Executive Vice President of The Marcus Corporation and Chairman, President, and Chief Executive Officer of Marcus Theatres Corporation

58

Stephen H. Marcus
has been our Chairman of the Board since December 1991. He served as our Chief Executive Officer from December 1988 to January
2009 and as our President from December 1988 until January 2008. Mr. Marcus has worked at our company for 56 years.

Gregory S. Marcus
joined our company in March 1992 as Director of Property Management/Corporate Development. He was promoted in 1999 to our Senior
Vice President – Corporate Development and became an executive officer in July 2005. He has served as our President since
January 2008 and was elected our Chief Executive Officer in January 2009. He was elected to serve on our Board of Directors in
October 2005. He is the son of Stephen H. Marcus, our Chairman of the Board.

Thomas F. Kissinger
joined our company in August 1993 as our Secretary and Director of Legal Affairs. In August 1995, he was promoted to our General
Counsel and Secretary and in October 2004, he was promoted to Vice President, General Counsel and Secretary. In August 2013, he
was promoted to Senior Executive Vice President, General Counsel and Secretary. He also formerly served as interim President of
Marcus Hotels & Resorts. Prior to August 1993, Mr. Kissinger was an associate with the law firm of Foley & Lardner LLP
for five years.

Douglas A. Neis
joined our company in February 1986 as Controller of the Marcus Theatres division and in November 1987, he was promoted to Controller
of Marcus Restaurants. In July 1991, Mr. Neis was appointed Vice President of Planning and Administration for Marcus Restaurants.
In September 1994, Mr. Neis was also named as our Director of Technology and in September 1995 he was elected as our Corporate
Controller. In September 1996, Mr. Neis was promoted to Chief Financial Officer and Treasurer.

Rolando B. Rodriguez
joined our company in August 2013 as our Executive Vice President and President and Chief Executive Officer of Marcus Theatres
Corporation. Mr. Rodriguez served as Chief Executive Officer and President and as a board member of Rave Cinemas in Dallas, Texas
for two years until its sale in May 2013. Prior to May 2011, he served in various positions with Wal-Mart for five years. He began
his career in 1975 at AMC Theatres, serving for 30 years in various positions including senior vice president of North American
field operations, senior vice president food & beverage group and executive vice president, North America operations service.
In January 2017, Mr. Rodriguez was named Chairman of Marcus Theatres Corporation.

Our executive officers
are generally elected annually by our Board of Directors after the annual meeting of shareholders. Each executive officer holds
office until his successor has been duly qualified and elected or until his earlier death, resignation or removal.

21

PART
II

Item 5.

Market for the Company’s Common Equity, Related
Shareholder Matters and Issuer Repurchases of Equity Securities.

(a) Stock
Performance Graph

The following information
in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed”
with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18
of the Securities and Exchange Act of 1934 and will not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such
a filing.

Set forth below
is a graph comparing the annual percentage change during our last five full fiscal years and the Transition Period in our cumulative
total shareholder return (stock price appreciation on a dividend reinvested basis) of our Common Shares to the cumulative total
return of: (1) a composite peer group index selected by us, and (2) companies included in the Russell 2000 Index. The composite
peer group index is comprised of the Dow Jones U.S. Hotels Index (weighted 40%) and a theatre index that we selected that includes
Regal Entertainment Group and Cinemark Holdings, Inc. (weighted 60%).

The indices within
the composite peer group index are weighted to approximate the relative annual revenue contributions of each of our business segments
to our total annual revenues over the past several fiscal years. The shareholder returns of the companies included in the Dow Jones
U.S. Hotels Index and the theatre index that we selected are weighted based on each company’s relative market capitalization
as of the beginning of the presented periods.

22

From
May 31, 2012 to December 28, 2017

Source: Zacks Investment Research, Inc.

5/31/12

5/30/13

5/29/14

5/28/15

12/31/15

12/29/16

12/28/17

The Marcus Corporation

$

100.00

$

112.75

$

144.76

$

172.76

$

168.58

$

286.06

$

250.96

Composite Peer Group Index(1)

100.00

133.92

156.39

195.28

167.29

202.85

249.55

Russell 2000 Index

100.00

132.44

153.84

171.31

156.66

190.89

219.77

(1) Weighted 40.0% for the Dow Jones U.S.
Hotels Index and 60.0% for the Company-selected Theatre Index.

23

(b) Market
Information

Our Common Stock,
$1 par value, is listed and traded on the New York Stock Exchange under the ticker symbol “MCS.” Our Class B Common
Stock, $1 par value, is neither listed nor traded on any exchange. During each quarter of fiscal 2017, we paid a dividend of $0.1250
per share on our Common Stock and $0.1136 per share on our Class B Common Stock. During each quarter of fiscal 2016, we paid a
dividend of $0.1125 per share on our Common Stock and $0.10227 per share on our Class B Common Stock.

The following table
lists the high and low sale prices of our Common Stock for the periods indicated (NYSE trading information only).

Fiscal 2017

1stQuarter

2ndQuarter

3rdQuarter

4thQuarter

High

$

32.60

$

34.90

$

31.25

$

29.55

Low

$

29.15

$

30.16

$

23.85

$

26.10

Fiscal 2016

1stQuarter

2ndQuarter

3rdQuarter

4thQuarter

High

$

19.65

$

21.36

$

25.30

$

32.15

Low

$

17.44

$

18.20

$

20.79

$

24.65

On
February 28, 2018, there were 1,259 shareholders of record of our Common Stock and 42 shareholders of record of our
Class B Common Stock.

(c) Stock
Repurchases

The following table
sets forth information with respect to purchases made by us or on our behalf of our Common Stock during the period indicated.

Period

Total Number of Shares Purchased

Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Programs(1)

Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)

September 29 – October 26

–

–

–

2,869,422

October 27 – November 30

–

–

–

2,869,422

December 1 – December 28

–

–

–

2,869,422

Total

–

–

–

2,869,422

(1)

Through December 28, 2017, our Board of Directors
had authorized the repurchase of up to 11.7 million shares of our outstanding Common Stock. Under these authorizations, we may
repurchase shares of our Common Stock from time to time in the open market, pursuant to privately negotiated transactions or otherwise.
As of December 28, 2017, we had repurchased approximately 8.8 million shares of our Common Stock under these authorizations. The
repurchased shares are held in our treasury pending potential future issuance in connection with employee benefit, option or stock
ownership plans or other general corporate purposes. These authorizations do not have an expiration date.

24

Item 6.

Selected Financial Data.

Five-Year
Financial Summary

F2017(3)

F2016

31
Weeks Ended December 31,
2015

F2015

F2014

F2013

Operating
Results(in thousands)

Revenues

$

622,714

543,864

324,267

488,067

447,939

412,836

Net earnings attributable to The Marcus Corporation

$

64,996

37,902

23,565

23,995

25,001

17,506

Common Stock Data(1)

Net earnings per common share

$

2.29

1.36

.84

.87

.92

.63

Cash dividends per common share

$

.50

.45

.21

.39

.35

1.34

Weighted-average
shares outstanding(in thousands)

28,403

27,957

27,917

27,687

27,150

27,865

Book value per share

$

15.98

14.10

13.13

12.48

11.95

11.33

Financial
Position(in thousands)

Total assets(2)

$

1,017,797

911,266

804,701

805,472

765,001

742,978

Long-term debt(2)

$

289,813

271,343

207,376

229,096

232,691

230,739

Shareholders’ equity attributable to The Marcus Corporation

$

445,024

390,112

363,352

343,779

326,211

306,702

Capital expenditures and acquisitions

$

114,804

147,372

44,452

74,988

56,673

23,491

Financial Ratios

Current ratio(2)

.48

.28

.35

.34

.33

.36

Debt/capitalization ratio(2)

.40

.42

.38

.42

.42

.44

Return on average shareholders’ equity

15.6

%

10.1

%

6.7

%

7.2

%

7.9

%

5.4

%

(1)

All per share and shares outstanding data is on a diluted
basis. Earnings per share data is calculated on our Common Stock using the two class method.

(2)

In 2016, total assets, long-term debt, current ratio and debt/capitalization ratio were
adjusted on a retrospective basis for the adoption of Accounting Standards Update (“ASU”) No. 2015-17, Balance
Sheet Classification of Deferred Taxes, and ASU No. 2015-03, Simplifying the Presentation of Debt Issuance
Costs. Accordingly, current deferred tax assets were reclassified to noncurrent assets and liabilities, and certain
debt issuance costs previously included with long-term assets were reclassified as a reduction in long-term debt.

(3)

Fiscal 2017 net earnings includes a one-time reduction
in deferred income taxes of $21,240, or $0.75 per diluted common share, related to the Tax Cuts and Jobs Acts of 2017.

25

Item 7.

Management’s Discussion and Analysis of Financial
Condition and Results of Operations.

Results
of Operations

General

As
a result of the change in our fiscal year end described below, we now report our consolidated and individual segment results of
operations on a 52- or 53-week fiscal year ending on the last Thursday in December. We divide our fiscal year into three 13-week
quarters and a final quarter consisting of 13 or 14 weeks. Our primary operations are reported in two business segments: theatres,
and hotels and resorts.

In October 2015,
we changed our fiscal year end from the last Thursday in May to the last Thursday in December. The change resulted in a 31-week
transition period from May 29, 2015 to December 31, 2015 (Transition Period), consisting of two 13-week periods and a final five-week
period. We refer in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
to the 13-week periods ended August 27, 2015 and November 26, 2015 as the first and second quarters of the Transition Period, respectively,
and the five-week period ended December 31, 2015 as the last five weeks of the Transition Period. We compare our results for these
periods to the comparable periods of fiscal 2015 – the unaudited 30-week period from May 30, 2014 to December 25, 2014, consisting
of two 13-week periods and a final four-week period. We refer in this MD&A to the 13-week periods ended August 28, 2014 and
November 27, 2014 as the first and second quarters of fiscal 2015, respectively.

Fiscal 2016 was
a 52-week year, beginning on January 1, 2016 and ended on December 29, 2016. In this MD&A, we compare financial results from
fiscal 2016 to the comparable period from the prior year that we refer to as “fiscal 2015C.” Fiscal 2015C consists
of the unaudited 53-week period beginning December 26, 2014 and ended December 31, 2015. Fiscal 2015 and fiscal 2014 were 52-week
years ending on the last Thursday in May. Fiscal 2017 was a 52-week year, beginning on December 30, 2016 and ending on December 28,
2017. Fiscal 2018 will be a 52-week year, which began on December 29, 2017 and will end on December 27, 2018.

Prior to the change
in our fiscal year end, our first fiscal quarter had produced the strongest operating results because this period coincided with
the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Our third fiscal
quarter had historically produced the weakest operating results in our hotels and resorts division primarily due to the effects
of reduced travel during the winter months. Our third fiscal quarter for our theatre division had historically been our second
strongest quarter, but was heavily dependent upon the quantity and quality of films released during the Thanksgiving through Christmas
holiday period.

Due to our change
to a December fiscal year end, we expect our quarterly results to be more consistent between quarters than they were in the past
and our results for the last two years under the new calendar have met those expectations. Our first fiscal quarter will likely
produce the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during
the winter months. We expect our second and third fiscal quarters to often produce our strongest operating results because these
periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business.
Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year
for our theatre division, we expect that the specific timing of the last Thursday in December will have an impact on the results
of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

Consolidated
Financial Comparisons

The
following tables set forth revenues, operating income, other income (expense), net earnings and net earnings per common share
for fiscal 2017, fiscal 2016, the unaudited prior year comparable 53-week period ended December 31, 2015 (F2015C), the Transition
Period (TP), the unaudited prior year comparable 30-week period ended December 25, 2014 (PY), fiscal 2015 and fiscal 2014 (in
millions, except for per share and percentage change data):

26

Change F17 v. F16

Change F16 v. F15C

F2017

F2016

Amt.

Pct.

F2015C

Amt.

Pct.

Revenues

$

622.7

$

543.9

$

78.8

14.5

%

$

531.7

$

12.2

2.3

%

Operating income

75.6

70.0

5.6

8.1

%

61.0

9.0

14.6

%

Other income (expense)

(7.5

)

(9.4

)

1.9

20.5

%

(11.2

)

1.8

16.0

%

Net loss attributable to noncontrolling interests

(0.5

)

(0.4

)

(0.1

)

-40.8

%

(0.4

)

-

-

%

Net earnings attributable to The Marcus Corporation

$

65.0

$

37.9

$

27.1

71.5

%

$

30.8

$

7.1

23.1

%

Net earnings per common share - diluted

$

2.29

$

1.36

$

0.93

68.4

%

$

1.10

$

0.26

23.6

%

Change TP v. PY

TP

PY

Amt.

Pct.

Revenues

$

324.3

$

280.6

$

43.7

15.5

%

Operating income

44.7

34.3

10.1

30.3

%

Other income (expense)

(6.4

)

(6.5

)

0.1

1.6

%

Net loss attributable to noncontrolling interests

(0.1

)

(0.1

)

-

-

%

Net earnings attributable to The Marcus Corporation

$

23.6

$

16.8

$

6.8

40.4

%

Net earnings per common share - diluted

$

0.84

$

0.61

$

0.23

37.7

%

Change F15 v. F14

F2015

F2014

Amt.

Pct.

Revenues

$

488.1

$

447.9

$

40.2

9.0

%

Operating income

50.6

48.9

1.7

3.6

%

Other income (expense)

(11.3

)

(11.2

)

(0.1

)

-1.4

%

Net loss attributable to noncontrolling interests

(0.4

)

(4.1

)

3.7

91.4

%

Net earnings attributable to The Marcus Corporation

$

24.0

$

25.0

$

(1.0

)

-4.0

%

Net earnings per common share - diluted

$

0.87

$

0.92

$

(0.05

)

-5.4

%

Fiscal
2017 versus Fiscal 2016

Our revenues increased
during fiscal 2017 compared to fiscal 2016 due to increased revenues from both our theatre division and hotels and resorts division.
Our operating income (earnings before other income/expense and income taxes) increased during fiscal 2017 compared to fiscal 2016
due to improved operating results from our theatre division, partially offset by a decrease in operating income from our hotels
and resorts division. Net earnings for fiscal 2017 increased compared to fiscal 2016 due to the increase in operating income, an
increased gain on disposition of property, equipment and other assets and a decrease in income tax expense, partially offset by
an increase in interest expense.

New theatres favorably
impacted revenues and operating income from our theatre division during fiscal 2017 compared to fiscal 2016. In mid-October 2016,
we opened a newly renovated theatre in Country Club Hills, Illinois. In mid-December 2016, our theatre division acquired Wehrenberg
Theatres® (which we refer to as Wehrenberg or Marcus Wehrenberg), a Midwestern theatre circuit consisting of 14 theatres with
197 screens, plus an 84,000 square foot retail center. In April 2017, we opened a new theatre in Shakopee, Minnesota. On June 30,
2017, we opened our first stand-alone all in-theatre dining location, branded BistroPlexSM and located in Greendale,
Wisconsin.

27

Operating results
from our theatre division were unfavorably impacted by a weaker slate of movies during the fiscal 2017 second and third quarters
compared to the second and third quarters of fiscal 2016, partially offset by a stronger slate of movies during the fiscal 2017
first and fourth quarters compared to the first and fourth quarters of fiscal 2016. Increased attendance resulting from positive
customer response to our recent investments and pricing strategies and increased concession sales per person due to our expanded
food and beverage offerings partially offset the negative impact of the weaker slate of movies during fiscal 2017 and contributed
to our improved operating results during fiscal 2017 compared to fiscal 2016. Increased preopening expenses related to new theatres
during the fiscal 2017 periods negatively impacted comparisons to the fiscal 2016 periods, as did the fact that our fiscal 2016
operating results included a significant one-time incentive payment from our pre-show advertising provider. Conversely, fiscal
2016 operating income was negatively impacted by one-time transaction costs related to the Wehrenberg acquisition.

Revenues
from our hotels and resorts division were favorably impacted during fiscal 2017 by our new SafeHouse® restaurant and
bar that we opened on March 1, 2017 in downtown Chicago, Illinois adjacent to our AC Chicago Downtown Hotel. Increased room revenues
during fiscal 2017, due in part to new villas that we opened during the second quarter of fiscal 2017 at the Grand Geneva Resort
& Spa, and increased revenue per available room for comparable hotels during fiscal 2017 compared to fiscal 2016, also contributed
to the increased total revenues during fiscal 2017. Operating income from our hotels and resorts division was unfavorably impacted
by preopening expenses and start-up operating losses from our new SafeHouse restaurant and bar during fiscal 2017, as well
as a small decrease in our management company profits.

Operating losses
from our corporate items, which include amounts not allocable to the business segments, increased during fiscal 2017 compared to
fiscal 2016 primarily due in part to one-time costs associated with the retirement of two directors from our board of directors
during the second quarter of fiscal 2017 and the death of a director during the third quarter of fiscal 2017. Increased long-term
incentive compensation expenses resulting from our improved financial performance and stock performance during the past several
years also contributed to increased operating losses from our corporate items during fiscal 2017, as did an increase in our contribution
to our charitable foundation during fiscal 2017.

We recognized investment
income of $588,000 during fiscal 2017 compared to investment income of $298,000 during fiscal 2016. Investment income includes
interest earned on cash and cash equivalents, as well as increases in the value of marketable securities and the cash surrender
value of a life insurance policy. We currently do not expect investment income during fiscal 2018 to vary significantly compared
to fiscal 2017.

Interest expense
totaled $12.1 million during fiscal 2017, an increase of $2.9 million, or 31.9%, compared to interest expense of $9.2 million during
fiscal 2016. The increase in interest expense during fiscal 2017 was due primarily to payments we made on the approximately $24.5
million of capital lease obligations we assumed in the Wehrenberg acquisition. We also experienced an increase in our total borrowings
under long-term debt agreements during fiscal 2017 compared to fiscal 2016, further contributing to our increased interest expense
during fiscal 2017, partially offset by a lower average interest rate during fiscal 2017, as we had a greater percentage of lower-cost
variable rate debt in our debt portfolio during fiscal 2017 compared to fiscal 2016.

We reported a net
gain on disposition of property, equipment and other assets of $4.0 million during fiscal 2017, compared to net losses on disposition
of property, equipment and other assets of $844,000 during fiscal 2016. The net gain during fiscal 2017 included a $4.9 million
gain on the sale of our 11% minority interest in The Westin® Atlanta Perimeter North in October 2017, a $600,000 gain from
the sale of our interest in Movietickets.com (which was purchased by a competing ticketing service, Fandango), as well as additional
gains from the sale of two theatres (one that had previously closed and one that had been operating prior to its sale) and our
sale of our 15% minority interest in the Sheraton Madison Hotel. Our net gain in fiscal 2017 was partially offset by losses from
our disposal of old theatre seats and other items in conjunction with our significant number of theatre renovations during the
fiscal 2017, as well as our write off of disposed equipment at one of our hotels during the first quarter of fiscal 2017. The majority
of the losses during fiscal 2016 were related to old theatre seats and other items disposed of in conjunction with our significant
number of theatre renovations during the year, partially offset by a gain on the sale of an unused parcel of land during fiscal
2016. The timing of our periodic sales and disposals of property, equipment and other assets results in variations each year in
the gains or losses that we report on dispositions of property, equipment and other assets. We anticipate the potential for additional
disposition losses resulting from theatre renovations, as well as disposition gains or losses from periodic sales of property,
equipment and other assets, during fiscal 2018 and beyond. As discussed in more detail in the “Current Plans” section
of this MD&A, we may report gains in future years from the potential sale of existing hotel assets.

We reported net
equity earnings from unconsolidated joint ventures of $46,000 and $301,000, respectively, during fiscal 2017 and fiscal 2016. Net
earnings during the reported periods included our pro-rata share from four hotel joint ventures in which we had minority ownership
interests during portions of fiscal 2017 and 2016. During fiscal 2017, we ceased management of the Sheraton Madison Hotel in Madison,
Wisconsin and The Westin Atlanta Perimeter North and sold our respective 15% and 11% minority ownership interests in these properties.
During fiscal 2016, we ceased management of The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida and sold virtually
all of our 10% minority ownership interest in the property. We have agreed to sell our remaining 0.49% interest during the next
several years. Conversely, the new Omaha Marriott Downtown at The Capitol District hotel in Omaha, Nebraska opened in August 2017
– a hotel we manage and in which we have a 10% minority ownership interest. We currently do not expect significant variations
in net equity gains or losses from unconsolidated joint ventures during fiscal 2018 compared to fiscal 2017, unless we significantly
increase the number of joint ventures in which we participate during fiscal 2018.

We include the operating
results of two majority-owned hotels, The Skirvin Hilton and The Lincoln Marriott Cornhusker Hotel, in the hotels and resorts division
revenue and operating income, and we add or deduct the after-tax net earnings or loss attributable to noncontrolling interests
to or from net earnings on the consolidated statement of earnings. We reported net losses attributable to noncontrolling interests
of $511,000 and $363,000, respectively, during fiscal 2017 and fiscal 2016. During the fourth quarter of fiscal 2017, we purchased
the noncontrolling interest of The Lincoln Marriott Cornhusker Hotel from our former partner for $410,000.

We reported income tax expense during fiscal
2017 of $3.6 million, a decrease of approximately $19.4 million, or 84.2%, compared to income tax expense of $23.0 million during
fiscal 2016. Our fiscal 2017 income tax expense was favorably impacted by the reversal of deferred income taxes of $21.2 million
due to the reduction in the federal tax rate from 35% to 21% resulting from the December 22, 2017 signing of the Tax Cuts and
Jobs Act of 2017. We estimate that this one-time adjustment to deferred taxes favorably impacted our net earnings per share during
fiscal 2017 by approximately $0.75 per share. Excluding the one-time favorable adjustment to income tax expense, our effective
income tax rate, after adjusting for losses from noncontrolling interests that are not tax-effected because the entities involved
are tax pass-through entities, was 36.2% during fiscal 2017 and 37.8% during fiscal 2016. As a result of the changes in the tax
law, we currently anticipate that our fiscal 2018 effective income tax rate will decrease to approximately 25-27%, excluding any potential further changes in federal or state income tax rates.

29

Weighted-average shares
outstanding were 28.4 million during fiscal 2017 and 28.0 million during fiscal 2016. All per share data in this MD&A is presented
on a fully diluted basis.

Fiscal
2016 versus Fiscal 2015C

Our revenues increased
during fiscal 2016 compared to fiscal 2015C due to increased revenues from our theatre division, partially offset by a decrease
in revenues from our hotels and resorts division and the fact that fiscal 2015C benefitted from an extra week of operations. Our
operating income (earnings before other income/expense and income taxes) and net earnings for fiscal 2016 increased compared to
fiscal 2015C due to improved operating results from both our theatre and hotels and resorts divisions, despite the favorable impact
of the additional week of operations on fiscal 2015C operating results.

Operating results from
our theatre division during fiscal 2016 were favorably impacted by a slightly stronger film slate during fiscal 2016, increased
attendance and average ticket price resulting from continued positive customer responses to our recent investments in theatre amenities
and pricing strategies, increased concession revenues, and increased pre-show advertising income compared to fiscal 2015C, partially
offset by the fact that fiscal 2015C included an additional week of operations. In mid-December 2016, our theatre division acquired
Wehrenberg Theatres, a Midwestern theatre circuit consisting of 14 theatres with 197 screens, plus an 84,000 square foot retail
center. Our theatre division revenues benefitted from two weeks of operation of these screens, but the benefit to our fiscal 2016
operating income was offset by one-time transaction costs related to this acquisition.

Operating results from
our hotels and resorts division during fiscal 2016 were favorably impacted by several factors, including strong cost controls and
increased revenue per available room for comparable hotels during fiscal 2016 compared to fiscal 2015C. In addition, operating
income for our hotels and resorts division during fiscal 2016 compared to fiscal 2015C was favorably impacted by the fact that
operating income during fiscal 2015C included a $2.6 million impairment charge related to one specific hotel. Conversely, operating
results from our hotels and resorts division during fiscal 2016 compared to fiscal 2015C were unfavorably impacted by the fact
that fiscal 2015C results included an additional week of operations and included results from the Hotel Phillips, which we sold
in October 2015. Operating results from our hotels and resorts division during fiscal 2016 were also negatively impacted by reduced
food and beverage revenues compared to fiscal 2015C, due in part to the fact that fiscal 2016 ended on December 29 and did not
include New Year’s Eve, historically a very strong food and beverage day for our properties.

Operating losses from our
corporate items, which include amounts not allocable to the business segments, increased during fiscal 2016 compared to fiscal
2015C primarily due to the fact that the prior year period was favorably impacted by the reimbursement of approximately $1.4 million
of costs previously expensed related to a mixed-use retail development known as The Corners of Brookfield. Increased compensation
expenses related to our improved operating results during fiscal 2016 compared to fiscal 2015C also contributed to increased operating
losses from our corporate items in fiscal 2016, partially offset by the fact that fiscal 2015C corporate operating losses included
one-time costs associated with the fiscal year-end change and costs related to the additional week of operations.

As described above, our
additional week of operations during fiscal 2015C benefitted both of our operating divisions, negatively impacting comparisons
of fiscal 2016 operating results to fiscal 2015C operating results. We estimate that the additional week beginning December 26,
2014 and ended January 1, 2015 contributed approximately $14.3 million in revenues and $4.8 million in operating income to fiscal
2015C. After interest expense and income taxes, we estimate that the extra week of operations contributed approximately $2.8 million
to our fiscal 2015C net earnings, or $0.10 per diluted common share.

30

We recognized investment
income of $298,000 during fiscal 2016 compared to investment income of $209,000 during fiscal 2015C.

Our interest expense totaled
$9.2 million during fiscal 2016, a decrease of over $800,000, or 8.6%, compared to interest expense of $10.0 million during fiscal
2015C. The decrease in interest expense during fiscal 2016 was due primarily to a lower average interest rate, as certain principal
payments we made on our fixed rate senior notes during fiscal 2016 were funded by borrowings on our revolving credit facility,
which has a lower associated interest rate. A small decrease in our total borrowings during the majority of fiscal 2016 compared
to fiscal 2015C also contributed to the decrease in interest expense during fiscal 2016.

We reported net losses
on disposition of property, equipment and other assets of $844,000 during fiscal 2016, compared to approximately $1.2 million during
fiscal 2015C. The majority of the losses during both periods were related to old theatre seats and other items disposed of in conjunction
with our significant number of theatre renovations during the periods, partially offset by a gain on the sale of an unused parcel
of land during fiscal 2016 and a small gain related to the sale of a former theatre during fiscal 2015C.

We reported net equity
earnings from unconsolidated joint ventures of $301,000 during fiscal 2016 compared to net equity losses from unconsolidated joint
ventures of $160,000 during fiscal 2015C. Net earnings/losses during the reported periods included our pro-rata share from two
hotel joint ventures in which we had 15% and 11% ownership interests, respectively, as of December 29, 2016. During fiscal 2016,
we ceased management of The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida and sold virtually all of our 10% minority
ownership interest in the property. We have agreed to sell our remaining 0.49% interest during the next several years. This ownership
interest and transaction did not significantly impact our financial results during the reported periods.

We include the operating
results of two majority-owned hotels, The Skirvin Hilton and The Lincoln Marriott Cornhusker Hotel, in the hotels and resorts division
revenue and operating income, and we add or deduct the after-tax net earnings or loss attributable to noncontrolling interests
to or from net earnings on the consolidated statement of earnings. We reported net losses attributable to noncontrolling interests
of $363,000 and $393,000, respectively, during fiscal 2016 and fiscal 2015C.

We reported income tax
expense during fiscal 2016 of $23.0 million, an increase of approximately $3.6 million, or 18.4%, compared to income tax expense
of $19.4 million during fiscal 2015C. Our effective income tax rate, after adjusting for losses from noncontrolling interests that
are not tax-effected because the entities involved are tax pass-through entities, was 37.8% during fiscal 2016 and 38.7% during
fiscal 2015C.

Weighted-average shares
outstanding were 28.0 million during fiscal 2016 and 27.9 million during fiscal 2015C.

Transition
Period versus Prior Year Comparable Period

Our revenues, operating
income and net earnings for the 31-week Transition Period increased compared to the prior year comparable 30-week period (which
we refer to as the prior year comparable period) due to improved operating results from both our theatre and hotels and resorts
divisions, as well as the favorable impact of the additional week of operations. Operating results from our theatre division during
the Transition Period were favorably impacted by increased attendance due primarily to a stronger film slate during the Transition
Period and continued positive customer responses to our recent investments and pricing strategies, as well as increased concession
revenues compared to the prior year comparable period. Operating results from our hotels and resorts division during the Transition
Period were favorably impacted by several factors, including a higher average daily room rate, strong cost controls and reduced
depreciation expense. Operating results from our corporate items, which include amounts not allocable to the business segments,
were negatively impacted by one-time costs associated with the fiscal year-end change, costs related to the additional week of
operations and increased compensation expenses related to our improved operating results during the Transition Period compared
to the prior year comparable period.

31

Our additional 31st week
of operations, beginning December 25, 2015 and ended on December 31, 2015, benefitted both of our operating divisions and contributed
approximately $17.4 million in revenues and $6.2 million in operating income to our Transition Period. After interest expense and
income taxes, we estimate that the extra week of operations contributed approximately $3.6 million to our Transition Period net
earnings, or $0.13 per diluted common share.

We did not have any significant
variations in investment income or interest expense during the Transition Period compared to the prior year comparable period.
We reported net equity losses from unconsolidated joint ventures of $36,000 during the Transition Period compared to net equity
losses from unconsolidated joint ventures of $63,000 during the prior year comparable period. Net losses during the reported periods
included our pro-rata share from three hotel joint ventures in which we had 15%, 11% and 10% ownership interests, respectively,
as of December 31, 2015.

In October 2015, we sold
the Hotel Phillips for a total purchase price of $13.5 million. Proceeds from the sale were approximately $13.1 million, net of
transaction costs. Pursuant to the sale agreement, we also retained our rights to receive payments under a tax incremental financing
(TIF) arrangement with the City of Kansas City, Missouri, which is recorded as a receivable at its estimated net realizable value
on the consolidated balance sheet. The result of the transaction was a loss on sale of approximately $70,000.

We reported net losses
on disposition of property, equipment and other assets of $490,000 during the Transition Period, compared to net losses on disposition
of property, equipment and other assets of $719,000 during the prior year comparable period. In addition to the loss on the Hotel
Phillips sale during the Transition Period, the majority of the remaining losses during both periods were related to old theatre
seats and other items disposed of in conjunction with our significant number of theatre renovations during the periods, partially
offset during the Transition Period by a small gain related to the sale of a former theatre.

We include the operating
results of two majority-owned hotels, The Skirvin Hilton and The Lincoln Marriott Cornhusker Hotel, in the hotels and resorts division
revenue and operating income, and we add or deduct the after-tax net earnings or loss attributable to noncontrolling interests
to or from net earnings on the consolidated statement of earnings. We reported net losses attributable to noncontrolling interests
of $122,000 and $82,000, respectively, during the Transition Period and prior year comparable period.

We reported income tax
expense for the Transition Period of $14.8 million, an increase of approximately $3.8 million, or 33.9%, compared to income tax
expense of $11.0 million for the prior year comparable period. Our effective income tax rate, after adjusting for losses from noncontrolling
interests that are not tax-effected because the entities involved are tax pass-through entities, was 38.6% during the Transition
Period and 39.7% during the prior year comparable period.

Weighted-average shares
outstanding were 27.9 million during the Transition Period and 27.6 million during the prior year comparable period.

Fiscal
2015 versus Fiscal 2014

We reported increased revenues
during fiscal 2015 due to increased revenues from both our theatre and hotels and resorts divisions. Operating income for fiscal
2015 increased compared to the prior year due to record operating results from our theatre division, partially offset by decreased
operating income from our hotels and resorts division. Comparisons of our net earnings attributable to The Marcus Corporation during
fiscal 2015 to net earnings attributable to The Marcus Corporation during fiscal 2014 were unfavorably impacted by an impairment
charge during fiscal 2015 and a significant loss attributable to noncontrolling interests during fiscal 2014.

32

Operating results from
our theatre division during fiscal 2015 were favorably impacted by increased attendance, due primarily to positive customer responses
to our recent investments, and our marketing and pricing strategies, partially offset by approximately $300,000 of non-cash impairment
charges. Operating income from our hotels and resorts division during fiscal 2015 was negatively impacted by several factors, including
increased depreciation expense, reduced results from our Chicago hotel as a result of the conversion of the hotel into a new brand
and a $2.6 million non-cash impairment charge. We estimate that total impairment charges from both divisions negatively impacted
our net earnings per share during fiscal 2015 by approximately $0.06 per share.

Fiscal 2015 operating losses
from our corporate items, which include amounts not allocable to the business segments, decreased compared to the prior year due
to the reversal of approximately $1.4 million of costs previously expensed related to a previously-described mixed-use retail development
known as The Corners of Brookfield (partially situated on the site of a former Marcus theatre location). In February 2015, we entered
into a joint venture agreement with IM Properties and Bradford Real Estate, two retail development and investment experts, to serve
as the new project management team leading The Corners to completion. IM Properties and Bradford serve as managing members of the
new joint venture, and we remain a 10% partner in the joint venture. Under this agreement, we contributed our land to the joint
venture early in our fiscal 2015 fourth quarter and, in conjunction with the commencement of construction as defined in the agreement,
we were reimbursed for the majority of our previously incurred predevelopment costs during the first quarter of the Transition
Period. The joint venture agreement provides a put/call option for our interest to be sold to the managing members for an agreed-upon
amount one year after the project is open and has reached a specified percentage of space leased.

In addition to changes
in operating income, our reported results for fiscal 2015 compared to the prior year were also impacted by changes to other non-operating
income and expense items. Net earnings attributable to The Marcus Corporation during fiscal 2015 were unfavorably impacted by a
decrease in investment income and an increase in losses on disposition of property, equipment and other assets, partially offset
by a decrease in interest expense and reduced equity losses from joint ventures during fiscal 2015 compared to the prior year.

We recognized investment
income of $252,000 during fiscal 2015 compared to investment income of approximately $630,000 during the prior year. The decrease
in investment income during fiscal 2015 compared to the prior year was due to the payoff of a note in our hotels and resorts division.

Our interest expense totaled
$9.9 million during fiscal 2015, a decrease of approximately $700,000, or 5.9%, compared to interest expense of $10.6 million during
fiscal 2014. The decrease in interest expense during fiscal 2015 was due entirely to a lower average interest rate, as we had slightly
higher total borrowings during fiscal 2015 compared to fiscal 2014. Our average interest rate was lower during fiscal 2015 due
primarily to our decision to pay off an approximately $21 million fixed rate mortgage related to one of our hotels at the end of
May 2014 using borrowings from our revolving credit facility.

We reported net losses
on disposition of property, equipment and other assets of approximately $1.5 million during fiscal 2015, compared to net losses
on disposition of property, equipment and other assets of $993,000 during fiscal 2014. The majority of the losses during fiscal
2015 were related to old theatre seats and other items disposed of in conjunction with our significant number of theatre renovations
during the year. Fiscal 2015 net losses also included losses related to the disposal of items in conjunction with the major renovation
of our Chicago hotel. Approximately $750,000 of the loss during fiscal 2014 was related to the sale of our 15% joint venture ownership
interest in the Westin Columbus hotel in Columbus, Ohio to our majority partner in that venture.

We reported net equity
losses from unconsolidated joint ventures of $186,000 during fiscal 2015 compared to net equity losses from unconsolidated joint
ventures of $250,000 during the prior year. Losses during fiscal 2015 and 2014 included our pro-rata share from two hotel joint
ventures in which we had 15% and 11% ownership interests, respectively, as well as a hotel joint venture that we entered into during
fiscal 2015 in which we had a 10% ownership interest.

33

Net earnings attributable
to The Marcus Corporation during fiscal 2014 benefitted from an allocation of a loss attributable to noncontrolling interests of
$4.1 million related primarily to a legal settlement with our partners in The Skirvin Hilton hotel. The settlement resulted in
a reallocation between partners of a prior year’s reported income from the extinguishment of debt at The Skirvin Hilton.
We estimate that the loss attributable to noncontrolling interests related directly to this legal settlement during fiscal 2014
was approximately $3.6 million before income taxes and favorably impacted our net earnings attributable to The Marcus Corporation
after income taxes by approximately $0.08 per share.

We reported income tax
expense for fiscal 2015 of $15.7 million, a decrease of approximately $1.1 million, or 6.7%, compared to fiscal 2014 income tax
expense of $16.8 million. Our effective income tax rate, after adjusting for earnings and losses from noncontrolling interests
that are not tax-effected because the entities involved are tax pass-through entities, was 39.5% during fiscal 2015 and 40.2% during
fiscal 2014.

Weighted-average shares
outstanding were 27.7 million during fiscal 2015 and 27.2 million during fiscal 2014.

Current Plans

Our aggregate cash capital
expenditures, acquisitions and purchases of interests in and contributions to joint ventures were approximately: (i) $115 million
during fiscal 2017 compared to $147 million during fiscal 2016 and $86 million during fiscal 2015C; (ii) $46 million during the
Transition Period compared to approximately $35 million during the prior year comparable 30-week period; and (iii) $77 million
during fiscal 2015 compared to $58 million during fiscal 2014. We currently anticipate that our fiscal 2018 capital expenditures
may be in the $65-$80 million range, excluding any presently unidentified acquisitions that may arise during the year. We will,
however, continue to monitor our operating results and economic and industry conditions so that we may adjust our plans accordingly.

Our current strategic plans
include the following goals and strategies:

Theatres

i

Our current plans for growth in our theatre division include several opportunities for new theatres
and screens. Late in our fiscal 2015 fourth quarter, we opened a theatre in Sun Prairie, Wisconsin, the Marcus Palace Cinema. Replacing
an existing nearby theatre in Madison, Wisconsin, this new 12-screen theatre has exceeded our expectations, and we opened two additional
screens at this location during the fourth quarter of fiscal 2016. In April 2017, we opened our new 10-screen Southbridge Crossing
Cinema in Shakopee, Minnesota. This state-of-the-art theatre includes DreamLoungerSM recliner seating in all auditoriums,
two UltraScreen DLX® auditoriums, as well as a Take FiveSMLounge and Zaffiro’s®
Express outlet. On June 30, 2017, we opened our first stand-alone all in-theatre dining location, branded BistroPlexSM
located in Greendale, Wisconsin. This new theatre features eight in-theatre dining auditoriums with DreamLounger recliners, including
two SuperScreen DLX® auditoriums, plus a separate full-service Take Five Lounge. We have announced plans to further
expand this concept, including a new location in Brookfield, Wisconsin. Construction is expected to begin on this new location
in 2018. In addition, we are looking for additional sites for potential new theatre locations in both new and existing markets.

34

i

In addition to building new theatres, we believe acquisitions of existing theatres or theatre circuits
is also a viable growth strategy for us. In April 2016, we purchased a closed 16-screen theatre in Country Club Hills, Illinois,
which is now our sixth theatre in the greater Chicago area, building on our strong presence in the Chicago southern suburbs. The
purchase was part of an Internal Revenue Code §1031 like-kind exchange in which the tax gain from our October 2015 sale of
the real estate related to the Hotel Phillips was deferred by reinvesting the applicable proceeds in replacement real estate within
a prescribed time period. We opened the newly renovated theatre early in the fourth quarter of fiscal 2016. The renovation added
DreamLounger recliner seating to all auditoriums, added one UltraScreen DLX auditorium and two SuperScreen DLX auditoriums,
as well as a Take Five Lounge and Reel Sizzle® outlet.

In December 2016,
we acquired the assets of Wehrenberg, a family-owned and operated theatre circuit based in St. Louis, Missouri with 197 screens
at 14 locations in Missouri, Iowa, Illinois and Minnesota. This acquisition increased our total number of screens by 29%. The movie
theatre industry is very fragmented, with approximately 50% of United States screens owned by the three largest theatre circuits
and the other 50% owned by approximately 800 smaller operators, making it very difficult to predict when acquisition opportunities
may arise. We have engaged third-party assistance to actively help us seek additional acquisitions in the future. We do not believe
that we are geographically constrained, and we believe that we may be able to add value to certain theatres through our various
proprietary amenities and operating expertise.

i

We have invested over $275 million to further enhance the movie-going experience and amenities
in new and existing theatres over the last four and one-half calendar years, with more investments planned for fiscal 2018. These
investments include:

DreamLounger
recliner additions. These luxurious, state-of-the-art recliners allow guests to go from upright to a full-recline position
in seconds. These seat changes require full auditorium remodels to accommodate the necessary 84 inches of legroom, resulting in
the loss of approximately 50% of the existing traditional seats in an average auditorium. To date, the addition of DreamLoungers
has increased attendance at each of our applicable theatres, outperforming nearby competitive theatres as well as growing the overall
market attendance in most cases. In addition to the two new theatres described above, we added DreamLounger recliner seats to 15
more theatres during fiscal 2017 (including six Marcus Wehrenberg theatres). As a result, as of December 28, 2017, we offered all
DreamLounger recliner seating in 39 theatres, representing approximately 61% of our company-owned, first-run theatres (including
the Marcus Wehrenberg theatres). Including our premium, large format (PLF) auditoriums with recliner seating, as of December 28,
2017, we offered our DreamLounger recliner seating in approximately 65% of our company-owned, first-run screens (including the
Marcus Wehrenberg screens), a percentage we believe to be the highest among the largest theatre chains in the nation. Currently,
seven Marcus Wehrenberg theatres offer recliner seating in all of its auditoriums.

We are currently
completing the addition of Dream lounger recliner seats to three more theatres (including two Marcus Wehrenberg theatres) and evaluating
opportunities to add our DreamLounger premium seating to five to seven additional theatres during the second half of fiscal 2018,
including two Marcus Wehrenberg theatres. As a result, by the end of fiscal 2018, our percentage of total company-owned, first-run
screens with DreamLounger recliner seating may be more than 75%.

UltraScreen
DLX and SuperScreen DLX (DreamLounger eXperience) conversions. We introduced one of the first PLF presentations to the
industry when we rolled out our proprietary UltraScreen® concept in 1999. During fiscal 2014, we introduced our UltraScreen
DLX concept by combining our premium, large-format presentation with DreamLounger recliner seating and Dolby® Atmos™
immersive sound to elevate the movie-going experience for our guests. During fiscal 2017, we opened two new UltraScreen
DLX auditoriums at our new theatre in Minnesota and two new SuperScreen DLX auditoriums at our new BistroPlex theatre
in Wisconsin, completed conversion of two traditional UltraScreens and one existing Wehrenberg-branded PLF screen to UltraScreen
DLX auditoriums at existing theatres in Wisconsin and Missouri, and converted 16 additional screens to SuperScreen DLX auditoriums
at ten existing theatres in six states (including 11 Marcus Wehrenberg screens). Several of our new PLF screens in fiscal 2017
included the added feature of heated DreamLounger recliner seats. As of December 28, 2017, we had 28 UltraScreen DLX auditoriums,
one traditional UltraScreen auditorium, 43 SuperScreen DLX auditoriums (a slightly smaller screen than an UltraScreen
but with the same DreamLounger seating and Dolby Atmos sound) at our theatre locations. Three of the acquired Marcus Wehrenberg
theatres feature IMAX® PLF screens. We currently offer at least one PLF screen in approximately 69% of our first-run, company-owned
theatres (including the Marcus Wehrenberg theatres) – once again a percentage we believe to be the highest percentage among
the largest theatre chains in the nation.

35

Our PLF screens
generally have higher per-screen revenues and draw customers from a larger geographic region compared to our standard screens,
and we charge a premium price to our guests for this experience. We are currently evaluating opportunities to convert two additional
screens at two existing theatres to UltraScreen DLX and SuperScreen DLX auditoriums during fiscal 2018, in addition
to two new UltraScreen DLX auditoriums planned for a third existing theatre.

Signature cocktail
and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres. We
believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage
and expertise that we can leverage to further grow revenues in our theatres. The concepts we are expanding include:

·

Take Five Lounge and Take Five Express – these full-service bars offer an inviting
atmosphere and a chef-inspired dining menu, along with a complete selection of cocktails, locally-brewed beers and wines. We opened
five new Take Five Lounge outlets in fiscal 2017, including two outlets opened at new theatres described above. In addition,
two Marcus Wehrenberg theatres offer a lounge concept, one of which was converted to a Take Five Lounge during fiscal 2017.
As of December 28, 2017, we offered bars at 26 theatres, representing approximately 41% of our company-owned, first-run theatres
(including the Marcus Wehrenberg theatres). We are currently evaluating opportunities to add bar service to additional theatres
during fiscal 2018.

·

Zaffiro’s
Express – these outlets offer lobby dining that includes appetizers, sandwiches,
salads, desserts and our signature Zaffiro’s THINCREDIBLE® handmade
thin-crust pizza. In select locations without a Take Five Lounge outlet, we offer
beer and wine at the Zaffiro’s Express outlet. We opened four new Zaffiro’s
Express outlets during fiscal 2017, increasing our number of theatres with this concept
to 26 as of December 28, 2017, representing approximately 41% of our company-owned, first-run
theatres (including the Marcus Wehrenberg theatres). We also operate three Zaffiro’s
Pizzeriaand Bar full-service restaurants. We are currently evaluating opportunities
to add two additional Zaffiro’s Express outlets during fiscal 2018.

·

Reel Sizzle – our newest signature dining concept serves menu items inspired by classic
Hollywood and the iconic diners of the 1950s. We offer Americana fare like burgers and chicken sandwiches prepared on a griddle
behind the counter, along with chicken tenders, crinkle cut fries, ice cream and signature shakes. As of December 28, 2017, we
operated seven Reel Sizzle outlets, including two that we opened during fiscal 2017, and we are evaluating additional opportunities
to add Reel Sizzle outlets to existing theatres in the future.

·

We also operate one Hollywood Café at an existing theatre and four of the Marcus
Wehrenberg theatres offer in-lobby dining concepts, operating under names such as Fred’s Drive-In or Five Star.
Including these additional concepts, as of December 28, 2017, we offered one or more in-lobby dining concepts in 36 theatres, representing
approximately 56% of our company-owned, first-run theatres (including the Marcus Wehrenberg theatres).

·

Big
Screen Bistro – this concept offers full-service, in-theatre dining with a
complete menu of drinks and chef-prepared salads, sandwiches, entrées and desserts.
Including two Marcus Wehrenberg theatres that had proprietary in-theatre dining concepts
converted to Big Screen Bistro concepts during fiscal 2017, one Marcus Wehrenberg
theatre offering in-theatre dining under the name Five Star and the eight-screen
new BistroPlex theatre described above, we currently offer in-theatre dining at
ten theatres in 37 total auditoriums (including one theatre and five screens managed
for another owner), representing approximately 14% of our company-owned, first-run theatres
(including the Marcus Wehrenberg theatres). We will continue to evaluate additional opportunities
to expand our in-theatre dining concepts in the future.

36

i

With each of these strategies, our goal continues to be to introduce and create entertainment destinations
that further define and enhance the customer value proposition for movie-going. We also will continue to maintain and enhance the
value of our existing theatre assets by regularly upgrading and remodeling our theatres in order to keep them fresh. In order to
accomplish the strategies noted above, we currently anticipate that our fiscal 2018 capital expenditures in this division may total
approximately $50-$60 million, excluding any additional acquisitions.

i

In addition to the growth strategies described above, our theatre division continues to focus on
multiple strategies designed to further increase revenues and improve the profitability of our existing theatres. These strategies
include various cost control efforts, as well as plans to expand ancillary theatre revenues, such as pre-show advertising, lobby
advertising, additional corporate and group sales, sponsorships and alternate auditorium uses.

i

We also have several customer-focused strategies designed to elevate our consumer knowledge, expectation
and connection, and provide us with a competitive advantage and the ability to deliver improved financial performance. These strategies
include the following:

Marketing initiatives.
We rolled out a “$5 Tuesday” promotion at every theatre in our circuit in mid-November 2013. Coupled with a free 44-oz
popcorn for everyone for the first five months of the program (subsequently offered only to our loyalty program members) and an
aggressive marketing campaign, our goal was to increase overall attendance by reaching mid-week value customers who may have reduced
their movie-going frequency or stopped going to the movies because of price. We have seen our Tuesday attendance increase dramatically
since the introduction of the $5 Tuesday promotion. We believe this promotion has created another “weekend” day for
us, without adversely impacting the movie-going habits of our regular weekend customers. The newly-acquired Wehrenberg theatres
previously offered a discounted price on Tuesday nights, but we immediately introduced our $5 Tuesday promotion with the free popcorn
for loyalty members upon acquiring the theatres and have experienced an increase in Tuesday performance at these theatres as a
result. We also offer a “$6 Student Thursday” promotion at 36 locations that has been well received by that particular
customer segment.

Loyalty program.
We launched a new, what we believe to be best-in-class, customer loyalty program called Magical Movie Rewards on March 30, 2014.
Designed to enhance the movie-going experience for our customers, the response to this program has exceeded our expectations. We
currently have approximately 2.6 million members enrolled in the program. Approximately 45% of all transactions in our theatres
during fiscal 2017 were completed by registered members of the loyalty program. The program allows members to earn points for each
dollar spent and access special offers available only to members. The rewards are redeemable at the box office, concession stand
or at the many Marcus Theatres food and beverage venues. In addition, we have partnered with Movio, a global leader in data analysis
for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with insight into
customer preferences, attendance habits and general demographics, which will help us deliver customized communication to our members.
In turn, members of this program can enjoy and plan for a more personalized movie-going experience. The program also gives us the
ability to cost effectively promote non-traditional programming and special events, particularly during non-peak time periods.
We believe that this will result in increased movie-going frequency, more frequent visits to the concession stand, increased loyalty
to Marcus Theatres and ultimately, improved operating results. The acquired Wehrenberg theatres offered a loyalty program to their
customers that had approximately 200,000 members. We converted these members to our Magical Movie Rewards program during fiscal
2017.

37

Technology enhancements.
We have enhanced our mobile ticketing capabilities and added the Magical Movie Rewards loyalty program to our downloadable Marcus
Theatres mobile application. We have redesigned our marcustheatres.com website and continued to install additional theatre-level
technology, such as new ticketing kiosks and digital menu boards and concession advertising monitors. Each of these enhancements
is designed to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices.

i

The addition of digital technology throughout our circuit (we offer digital cinema projection on
100% of our first-run screens) has provided us with additional opportunities to obtain non-motion picture programming from other
new and existing content providers, including live and pre-recorded performances of the Metropolitan Opera, as well as sports,
music and other events, at many of our locations. We offer weekday alternate programming at many of our theatres across our circuit.
The special programming includes classic movies, live performances, comedy shows and children’s performances. We believe
this type of programming is more impactful when presented on the big screen and provides an opportunity to continue to expand our
audience base beyond traditional moviegoers.

i

In addition, digital 3D presentation of films continued to positively contribute to our box office
receipts during the periods presented in this Annual Report on Form 10-K. As of December 28, 2017, we had the ability to offer
digital 3D presentations in 259, or approximately 31%, of our first-run screens, including the vast majority of our UltraScreens.
We have the ability to increase the number of digital 3D capable screens we offer to our guests in the future as needed, based
on the number of digital 3D films anticipated to be released during future periods and our customers’ response to these 3D
releases.

Hotels and Resorts

i

Our hotels and resorts division is actively seeking opportunities to increase the number of rooms
under management. The goal of our hotel investment business, MCS Capital, under the direction of a well-respected industry veteran
with extensive hotel acquisition and development experience, is to seek opportunities where we may act as an investment fund sponsor,
joint venture partner or sole investor in acquiring additional hotel properties. We continue to believe that opportunities to acquire
high-quality hotels at reasonable valuations will be present in the future for well-capitalized companies, and we believe that
there are partners available to work with us when the appropriate hotel assets are identified. We have a number of potential growth
opportunities that we are evaluating.

i

We also continue to pursue additional management contracts for other owners, some of which may
include small equity investments similar to the investments we have made in the past with strategic equity partners. Although total
revenues from an individual hotel management contract are significantly less than from an owned hotel, the operating margins are
generally significantly higher due to the fact that all direct costs of operating the property are typically borne by the owner
of the property. Management contracts provide us with an opportunity to increase our total number of managed rooms without a significant
investment, thereby increasing our returns on equity. During fiscal 2016, we expanded our hotel development team with the addition
of a senior executive experienced in business development, marketing, feasibility and valuation. During the Transition Period,
we became a minority investor and manager of the new Omaha Marriott Downtown at The Capitol District hotel in Omaha, Nebraska –
the hotel opened in August 2017. In September 2017, we assumed management of the Sheraton Chapel Hill Hotel in Chapel Hill, North
Carolina. In January 2018, we assumed management of the newly-opened Murieta Inn and Spa in Rancho Murieta, California.

38

i

Unlike our theatre assets, where the majority of our return on investment comes from the annual
cash flow generated by operations, a portion of the return on our hotel investments is derived from effective portfolio management,
which includes determining the proper branding strategy for a given asset along with the proper level of investment and upgrades,
as well as identifying an effective divestiture strategy for the asset when appropriate. During fiscal 2015, we converted our company-owned
Four Points by Sheraton Chicago Downtown/Magnificent Mile property into one of the first AC Hotels by Marriott in the United States.
In January 2018, we announced plans to convert one of our owned hotels, the InterContinental Milwaukee, into an independent arts
hotel by mid-2019. Conversely, early in the second quarter of fiscal 2017, we ceased management of the Sheraton Madison Hotel in
Madison, Wisconsin and sold our 15% minority ownership interest in the property for a small gain of approximately $300,000. Early
in the fourth quarter of fiscal 2017, we ceased management of The Westin® Atlanta Perimeter North in Atlanta, Georgia and sold
our 11% minority interest in the property for a substantial gain of approximately $4.9 million.

i

We have been very opportunistic in our past hotel investments as we have, on many occasions, acquired
assets at favorable terms and then improved the properties and operations to create value. We also will continue to periodically
explore opportunities to monetize one or more owned hotels. We will consider many factors as we actively review opportunities to
execute this strategy, including income tax considerations, the ability to retain management, pricing and individual market considerations.
We evaluate strategies for our hotels on an asset-by-asset basis. We have not set a specific goal for the number of hotels that
may be considered for this strategy, nor have we set a specific timetable. It is very possible that we may sell a particular hotel
or hotels during fiscal 2018 or beyond if we determine that such action is in the best interest of our shareholders. In October
2015, we sold the Hotel Phillips in Kansas City, Missouri for $13.1 million of net proceeds. The Hotel Phillips was the smallest
of our company-owned hotels, both in revenues and operating income.

i

Our fiscal 2018 plans for our hotels and resorts division also include continued reinvestment in
our existing properties to maintain and enhance their value. During fiscal 2016, we made additional reinvestments in The Skirvin
Hilton hotel, and we expanded our centralized laundry facility in order to increase our capacity to serve non-company owned businesses.
During fiscal 2017, we added 29 spacious, all-season villas to the Grand Geneva Resort & Spa in Lake Geneva, Wisconsin. This
multi-million dollar investment was designed to enhance the resort experience for travelers who want expanded, upscale accommodations
and increased our total combined units at this top Midwest destination property to more than 600 (including the Timber Ridge Lodge).
During fiscal 2018, we plan to make additional reinvestments in the Hilton Madison at Monona Terrace. Including possible growth
opportunities currently being evaluated, we believe our total fiscal 2018 hotels and resorts capital expenditures may total approximately
$15 $20 million, excluding any additional presently unidentified acquisitions.

i

In addition to the growth strategies described above, our hotels and resorts division continues
to focus on several strategies that are intended to further grow the division’s revenues and profits. These include leveraging
our food and beverage expertise for growth opportunities and growing our catering and events revenues. Early in the Transition
Period, we purchased the SafeHouse in Milwaukee, Wisconsin, adding another restaurant brand to our portfolio. The SafeHouse
is an iconic, spy-themed restaurant and bar that has operated in Milwaukee for nearly 50 years. During fiscal 2016, we completed
a significant renovation of the Milwaukee SafeHouse and began construction on a new SafeHouse restaurant and bar
in downtown Chicago, Illinois, adjacent to our AC Chicago Downtown Hotel. The new location opened on March 1, 2017. We also opened
a complimentary business capitalizing on the popularity of team escape games, the EscapeHouse Chicago, in November 2016,
next door to the new SafeHouse. Our current focus is on ensuring the success of our new SafeHouse, but we anticipate
exploring additional opportunities to expand this concept in the future.

39

i

We have also invested in sales, revenue management and internet marketing strategies in an effort
to further increase our profitability, as well as human resource and cost improvement strategies designed to achieve operational
excellence and improved operating margins. We are focused on developing our customer service delivery and technology enhancements
to improve customer interactions through mobile platforms and other customer touch points.

i

We have taken our highly regarded web development team and created a new business unit to be managed
by the hotels and resorts division called Graydient Creative. Graydient leverages our expertise in digital marketing, creating
a new profit center for the division by seeking new external customers. Services provided by Graydient include, but are not limited
to, website design and development, branding and print design, and social media management.

Corporate

i

We periodically review opportunities to make investments in long-term growth opportunities that
may not be entirely related to our two primary businesses. During the Transition Period, we purchased a riverfront parcel of land
in downtown Milwaukee with significant development potential. The land purchase was part of an Internal Revenue Code §1031
tax-deferred like-kind exchange in conjunction with our sale of the Hotel Phillips. Various plans for a mixed-use development that
are under consideration for this parcel include a movie theatre, office space and retail. In addition, during fiscal 2016, the
city of Milwaukee requested proposals for a parcel of land across the street from our Hilton Milwaukee City Center hotel. We responded
to that request with a proposed plan for a mixed-use project that would expand the number of rooms operated by the Hilton, add
a residential component and provide a transit center for a city-proposed streetcar extension. This was a preliminary proposal and
an expansion of the city’s convention center would be a prerequisite for any action on this proposal, if our proposal were
to be selected by the city. Both of the above-described projects have many open issues that would have to be resolved before we
would move forward and we would consider bringing on a partner or partners on these projects if they were to proceed. We do not
expect any substantial capital expenditures to be incurred on our part for these projects during fiscal 2018.

i

In addition to operational and growth strategies in our operating divisions, we continue to seek
additional opportunities to enhance shareholder value, including strategies related to our dividend policy, share repurchases and
asset divestitures. We increased our regular quarterly common stock cash dividend by 10.5% during the fourth quarter of fiscal
2015, another 7.1% during the first quarter of fiscal 2016, 11.1% during the first quarter of fiscal 2017 and 20.0% during the first
quarter of fiscal 2018. We also have repurchased approximately 3.9 million shares of our common stock during the last six-plus
fiscal years under our existing Board of Directors stock repurchase authorizations. We will also continue to evaluate opportunities
to sell real estate when appropriate, allowing us to benefit from the underlying value of our real estate assets. When possible,
we will attempt to avail ourselves of the provisions of Internal Revenue Code §1031 related to tax-deferred like-kind exchange
transactions. In addition to the sale of a former theatre parcel in Madison, Wisconsin and/or selected hotels in our portfolio,
we plan to evaluate opportunities to sell additional out-parcels at several owned theatre developments, as well as other non-operating
and/or non-performing real estate in our portfolio.

The actual number, mix
and timing of our potential future new facilities and expansions and/or divestitures will depend, in large part, on industry and
economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and
trends, and the availability of attractive acquisition and investment opportunities. It is likely that our growth goals and strategies
will continue to evolve and change in response to these and other factors, and there can be no assurance that we will achieve our
current goals. Each of our goals and strategies are subject to the various risk factors discussed above in this Annual Report on
Form 10-K.

40

Theatres

Our oldest and most profitable
division is our theatre division. The theatre division contributed: (i) 64.4% of our consolidated revenues and 86.3% of our consolidated
operating income, excluding corporate items, during fiscal 2017, compared to 60.3% and 83.1%, respectively, during fiscal 2016
and 57.7% and 82.8%, respectively, during fiscal 2015C; (ii) 56.4% and 68.2%, respectively, during the Transition Period, compared
to 51.8% and 65.3%, respectively, during the prior year comparable period; and (iii) 55.2% and 83.8%, respectively, during fiscal
2015, compared to 54.3% and 74.3%, respectively, during fiscal 2014. The theatre division operates motion picture theatres in Wisconsin,
Illinois, Iowa, Minnesota, Missouri, Nebraska, North Dakota and Ohio, a family entertainment center in Wisconsin and a retail center
in Missouri. The following tables set forth revenues, operating income, operating margin, screens and theatre locations for fiscal
2017, fiscal 2016, the unaudited prior year comparable 53-week period ended December 31, 2015 (F2015C), the Transition Period (TP),
the unaudited prior year comparable 30-week period ended December 25, 2014 (PY), and the prior two fiscal years:

Change F17 v. F16

Change F16 v. F15C

F2017

F2016

Amt.

Pct.

F2015C

Amt.

Pct.

(in millions, except percentages)

Revenues

$

401.3

$

328.2

$

73.1

22.3

%

$

306.7

$

21.5

7.0

%

Operating income

$

80.3

$

71.8

$

8.5

11.9

%

$

62.9

$

8.9

14.1

%

Operating margin

20.0

%

21.9

%

20.5

%

Change TP v. PY

TP

PY

Amt.

Pct.

(in millions, except percentages)

Revenues

$

182.8

$

145.3

$

37.5

25.8

%

Operating income

$

37.2

$

27.7

$

9.5

34.1

%

Operating margin

20.3

%

19.1

%

Change F15 v. F14

F2015

F2014

Amt.

Pct.

(in millions, except percentages)

Revenues

$

269.2

$

243.2

$

26.0

10.7

%

Operating income

$

53.5

$

46.5

$

7.0

15.1

%

Operating margin

19.9

%

19.1

%

Number of screens and locations at period-end (1)(2)

F2017

F2016

TP

F2015

F2014

Theatre screens

895

885

668

681

685

Theatre locations

69

68

53

55

55

Average screens per location

13.0

13.0

12.6

12.4

12.5

(1)

Includes 11 screens at two locations managed for other
owners in all five periods.

(2)

Includes 29 budget screens at three locations at the end
of fiscal 2017, 25 budget screens at three locations at the end of fiscal 2016, 15 budget screens at two locations at the end
of the Transition Period and 28 budget screens at four locations in the two prior years. Compared to first-run theatres, budget
theatres generally have lower box office revenues and associated film costs, but higher concession sales as a percentage of box
office revenues.

41

The following tables provide
a further breakdown of the components of revenues for the theatre division for fiscal 2017, fiscal 2016, the unaudited prior year
comparable 53-week period ended December 31, 2015 (F2015C), the Transition Period (TP), the unaudited comparable prior year 30-week
period ended December 25, 2014 (PY) and the prior two fiscal years:

Change F17 v. F16

Change F16 v. F15C

F2017

F2016

Amt.

Pct.

F2015C

Amt.

Pct.

(in millions, except percentages)

Box office revenues

$

227.1

$

186.8

$

40.3

21.6

%

$

176.3

$

10.5

6.0

%

Concession revenues

149.0

121.0

28.0

23.2

%

115.1

5.9

5.1

%

Other revenues

25.2

20.4

4.8

23.5

%

15.3

5.1

33.3

%

Total revenues

$

401.3

$

328.2

$

73.1

22.3

%

$

306.7

$

21.5

7.0

%

Change TP v. PY

TP

PY

Amt.

Pct.

(in millions, except percentages)

Box office revenues

$

104.6

$

85.6

$

19.0

22.2

%

Concession revenues

69.2

52.9

16.3

30.9

%

Other revenues

9.0

6.8

2.2

31.5

%

Total revenues

$

182.8

$

145.3

$

37.5

25.8

%

Change F15 v. F14

F2015

F2014

Amt.

Pct.

(in millions, except percentages)

Box office revenues

$

157.3

$

146.0

$

11.3

7.7

%

Concession revenues

98.7

84.1

14.6

17.5

%

Other revenues

13.2

13.1

0.1

0.7

%

Total revenues

$

269.2

$

243.2

$

26.0

10.7

%

Fiscal
2017 versus Fiscal 2016

Our theatre division fiscal
2017 revenues increased by 22.3% compared to fiscal 2016 due to the Marcus Wehrenberg theatres that we acquired during the fourth
quarter of fiscal 2016 and new theatres we opened during fiscal 2016 and fiscal 2017, as well as an increase in our average ticket
price and average concession revenues per person at comparable theatres, resulting in increased box office receipts and concession
revenues. Decreased attendance at comparable theatres due to a weaker film slate negatively impacted theatre division revenues
and operating income during fiscal 2017 compared to fiscal 2016. Excluding the Marcus Wehrenberg theatres and three theatres that
we opened during fiscal 2016 and fiscal 2017, comparable theatre division revenues decreased by 0.8% during fiscal 2017 compared
to the prior year.

On December 16, 2016, we
acquired 14 owned and/or leased movie theatres in Missouri, Iowa, Illinois and Minnesota, along with Ronnie’s Plaza,
an 84,000 square foot retail center in St. Louis, Missouri, from Wehrenberg and its affiliated entities for a purchase price of
approximately $65 million, plus normal closing adjustments and less a negative net working capital balance that we assumed in the
transaction. We funded the transaction using available borrowings under our existing credit facility. In conjunction with this
transaction, we acquired the underlying real estate for six of the theatre locations as well as the retail center. The remaining
leased locations include several leases that have been classified as capital leases. Nine of the 14 acquired Wehrenberg theatres
operate in the greater St. Louis area. The Marcus Wehrenberg theatres contributed approximately $5.1 million and $(450,000), respectively,
to our theatre division revenues and operating income for the two weeks that we owned them during fiscal 2016. The operating loss
from the acquired theatres is due to approximately $2.0 million in one-time acquisition-related expenses.

42

Total theatre attendance
increased 19.1% and total box office receipts increased 21.6% during fiscal 2017 compared to fiscal 2016. Excluding the Marcus
Wehrenberg theatres, three theatres that we opened during fiscal 2016 and fiscal 2017, and two theatres that are no longer comparable
to last year because their pricing policies were significantly changed as a result of new theatres we opened nearby, fiscal 2017
attendance and box office receipts at our comparable theatres decreased approximately 3.1% and 1.0%, respectively, compared to
the prior year. The following table indicates our percentage change in comparable theatre attendance during each of the interim
periods of fiscal 2017 compared to the same periods during fiscal 2016. In addition, the table compares the percentage change in
our fiscal 2017 box office revenues (compared to the prior year) to the corresponding percentage change in the United States box
office receipts (excluding new builds for the top ten theatre circuits) during the same periods (as compiled by us from data received
from Rentrak, a national box office reporting service for the theatre industry):

Change F17 v. F16

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Total

Pct. change in Marcus theatre attendance

+8.6

%

-3.6

%

-17.4

%

+0.8

%

-3.1

%

Pct. change in Marcus box office revenues

+9.1

%

-4.1

%

-15.6

%

+6.9

%

-1.0

%

Pct. change in U.S. box office revenues

+7.0

%

-4.8

%

-13.4

%

+1.7

%

-2.6

%

Marcus outperformance v. U.S.

+2.1

pts

+0.7

pts

-2.2

pts

+5.2

pts

+1.6

pts

We outperformed the industry
during fiscal 2017 by 1.6 percentage points, and we have outperformed the industry during 14 of the last 16 quarters. We believe
our underperformance during the third quarter of fiscal 2017 was an anomaly, as evidenced by the fact that we outperformed the
industry by over five percentage points during the fourth quarter of fiscal 2017. We believe our continued overall outperformance
of the industry is attributable to the investments we have made in new features and amenities in select theatres and our implementation
of innovative operating and marketing strategies that have increased attendance, including our $5 Tuesday promotion and our customer
loyalty program (all of which are described in the “Current Plans” section of this MD&A).

Theatre attendance and
corresponding box office revenues vary significantly from quarter to quarter due to a variety of factors. As evidenced by the change
in United States box office revenues, our fiscal 2017 first and fourth quarter box office revenues and attendance were impacted
by a stronger slate of movies compared to the same quarters during fiscal 2016. Conversely, our fiscal 2017 second and third quarter
box office revenues and attendance were impacted by a weaker slate of movies compared to the same quarters during fiscal 2016.

The third quarter was a
very difficult period for the industry, with ten straight weeks of decreased attendance and box office receipts in July and August,
before ending with three strong weeks in September. We also believe that the particular mix of films during July 2017 was not as
favorable to our Midwestern circuit as compared to the films released during July 2016. The top film during July 2016 was The
Secret Life of Pets and this family-oriented film performed particularly well in our theatres compared to the rest of the nation,
contributing to our comparative underperformance to the industry in July 2017 versus July 2016. Conversely, a stronger slate of
movies during the first quarter of fiscal 2017, including the second best performing film of the year, Beauty and the Beast,
and during the fourth quarter of fiscal 2017, including the top performing film of fiscal 2017, Star Wars: The Last Jedi,
contributed to the improvement in attendance and box office performance during those periods compared to the same periods of the
prior year.

43

Revenues for the theatre
business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together
with studio marketing, advertising and support campaigns and the maintenance of a reasonably lengthy “window” between
the date a film is released in theatres and the date a film is released to other channels, including video on-demand (VOD) and
DVD. These are factors over which we have no control. The national DVD release window decreased during calendar 2017 to 104 days
compared to the approximately 110-130 days that had been in place for the previous ten or more calendar years. Many current films
are now released to ancillary markets within 75-90 days, and more than one studio has been discussing their interest in creating
a new, shorter premium VOD window. We have expressed our concerns to the studios regarding the impact that a shortened DVD or VOD
release window may have on future box office receipts. We have also indicated that we would seek adjustments in the current financial
arrangements we have with film studios in the event that the film studios implement shorter release windows.

We believe that the most
significant factor contributing to variations in theatre attendance during fiscal 2017, as in other periods, was the quantity and
quality of films released during the respective periods compared to the films released during the same periods of the prior year.
Blockbusters (generally defined as films grossing more than $100 million nationally) accounted for a slightly decreased percentage
of our total box office revenues during fiscal 2017, with our top 15 performing films accounting for 41% of our fiscal 2017 box
office revenues compared to 43% during fiscal 2016. The following five top performing fiscal 2017 films accounted for nearly 20%
of the total box office revenues for our circuit: Star Wars: The Last Jedi, Beauty and the Beast, Guardians of
the Galaxy Vol. 2, It and Wonder Woman.

The quantity of wide-release
films shown in our theatres and number of wide-release films provided by the seven major studios decreased during fiscal 2017 compared
to fiscal 2016. A film is generally considered “wide release” if it is shown on over 600 screens nationally, and these
films generally have the greatest impact on box office receipts. We played 124 wide-release films (including 34 digital 3D films)
at our theatres during fiscal 2017 compared to 133 wide-release films (including 33 digital 3D films) during fiscal 2016. In total,
we played 264 films and 170 alternate content attractions at our theatres during fiscal 2017 compared to 253 films and 144 alternate
content attractions during fiscal 2016. Based upon projected film and alternate content availability, we currently estimate that
we may show an increased number of films and alternate content events on our screens during fiscal 2018 compared to fiscal 2017.
There are currently approximately 24 digital 3D films scheduled to be released by the film industry during our fiscal 2018, although
we anticipate that additional 3D films may be announced at a later date.

Excluding the Marcus Wehrenberg
theatres, our average ticket price increased 2.6% during fiscal 2017 compared to fiscal 2016. The increase in our average ticket
price contributed approximately $3.9 million to our comparable theatres box office receipts during fiscal 2017 compared to fiscal
2016, partially offsetting the impact of reduced attendance at comparable theatres during fiscal 2017. The increase was partially
attributable to modest price increases we implemented in November 2016 and October 2017. In addition, the fact that we have increased
our number of premium large format (PLF) screens, with a corresponding price premium, also contributed to our increased average
ticket price during fiscal 2017. We also believe that a change in film product mix had a favorable impact on our average ticket
price during fiscal 2017, as two of our top three films during fiscal 2016 were animated family movies (resulting in a higher percentage
of lower-priced children’s tickets sold, compared to more adult-oriented and R-rated films that typically result in a higher
average ticket price), compared to no animated family films among the top five films during fiscal 2017 and a particularly strong
performance of Star Wars: The Last Jedi in our PLF auditoriums. Conversely, the percentage of our total box office receipts
attributable to 3D presentations during fiscal 2017 decreased compared to the percentage of our total box office receipts attributable
to 3D presentations during fiscal 2016, meaning that 3D films had an unfavorable impact on our change in average ticket price during
fiscal 2017 (a lower percentage of 3D films may result in a lower average ticket price due to the premium price associated with
3D). We currently expect our average ticket price to increase during fiscal 2018, driven in part by our increased number of PLF
screens that generate premium pricing, a modest price increase we introduced in October 2017 and the fact that we have been introducing
modest increases in pricing to selected Marcus Wehrenberg theatres after we introduce our DreamLounger recliner seating to those
theatres.

44

Our average concession
sales per person at comparable theatres (excluding the Marcus Wehrenberg theatres) increased 5.1% during fiscal 2017 compared to
fiscal 2016. Pricing, concession/food and beverage product mix and film product mix are the three primary factors that impact our
concession sales per person. A change in concession product mix, including increased sales of higher priced non-traditional food
and beverage items from our increasing number of Take Five Lounges, Zaffiro’s Express and Reel Sizzle
outlets, as well as modest selected price increases we introduced in November 2016 and October 2017, were the primary reasons for
our increased average concession sales per person during fiscal 2017. We currently expect to report increases in our average concession
sales per person during fiscal 2018 compared to fiscal 2017 due to our increased number of non-traditional food and beverage outlets
and the modest price increases introduced in October 2017, although as noted above, several factors may impact our actual results
in this key metric. Excluding the impact of the Wehrenberg theatres and new screens added during fiscal 2017, the increase in average
concession sales per person contributed approximately $4.6 million to our comparable theatres concession revenues during fiscal
2017 compared to fiscal 2016, offsetting the impact of reduced attendance at comparable theatres during fiscal 2017.

Our theatre division
operating income increased during fiscal 2017 compared to fiscal 2016 due primarily to operating income from the acquired
Marcus Wehrenberg theatres. Decreased attendance at comparable theatres described above and preopening expenses of
approximately $800,000 related to the opening of two new theatres negatively impacted our operating income during fiscal
2017. Our theatre division revenues and operating income during fiscal 2017 were also negatively impacted by the fact that we
had anywhere from 14 to 40 screens out of service from March through mid-November during fiscal 2017 due to renovations underway
at multiple theatres. In addition, comparisons to operating income during fiscal 2016 were negatively impacted by the fact
that our fiscal 2016 operating results included a significant one-time incentive payment from our pre-show advertising
provider. Conversely, fiscal 2016 operating income was negatively impacted by one-time transaction costs related to the
Wehrenberg acquisition.

Operating margin for our
theatre division decreased to 20.0% for fiscal 2017, compared to 21.9% for fiscal 2016. The aforementioned preopening expenses,
in conjunction with the weaker film slate during fiscal 2017 and higher fixed costs, such as depreciation and amortization, rent
and property taxes, due in part to the Wehrenberg acquisition, negatively impacted our theatre division operating margins during
fiscal 2017 compared to fiscal 2016. Decreased attendance generally negatively impacts our operating margin, particularly because
the decreased attendance has the effect of decreasing our high-margin concession revenues and because fixed expenses become a higher
percentage of revenues. In addition, if a greater portion of our concession revenues is the result of the sale of non-traditional
food and beverage items that typically have a higher product cost compared to traditional concession items, operating margins may
be negatively impacted to a small extent. Excluding preopening expenses from the two new theatres added in fiscal 2017 and the
one-time incentive payment and transaction costs in fiscal 2016, our theatre division operating margin during fiscal 2017 was 20.2%
compared to 21.5% during fiscal 2016. Film costs did not materially impact our operating margin during fiscal 2017 as compared
to fiscal 2016.

Other revenues, which include
management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues, rental income and gift
card breakage income, may also impact operating margin. Other revenues increased by $4.8 million during fiscal 2017 compared to
fiscal 2016. Excluding $5.2 million of other income related to the Marcus Wehrenberg theatres, including preshow advertising income,
internet surcharge ticketing fees and rental income from the retail center described above, the remaining decrease in other revenues
of approximately $400,000, or 2.0%, during fiscal 2017 was attributable to comparable theatres and was due entirely to the fact
that during fiscal 2016, we received a significant one-time $3.3 million incentive payment from our current advertising provider,
Screenvision. Despite that significant one-time benefit in fiscal 2016, our other income from comparable theatres nearly equaled
last year’s total primarily due to an increase in preshow advertising income, internet surcharge ticketing fees and breakage
on presold discounted tickets.

We did not add any
new screens to existing theatres during fiscal 2017. We opened two new UltraScreen DLX auditoriums at an existing
theatre in Minnesota in February 2016 and two new screens at an existing theatre in Wisconsin in November 2016. As noted
above, we also opened a new 16-screen theatre in Illinois in October 2016, a 10-screen theatre in Minnesota in April 2017 and
an eight-screen theatre in Wisconsin in June 2017. We closed and sold one eight-screen budget-oriented theatre during the
fiscal 2017 second quarter. On the first day of our fiscal 2017 third quarter, we converted an existing 12-screen first-run
theatre to a budget-oriented theatre. We did not close any theatres during fiscal 2016.

45

Box office revenues at
comparable theatres during the first quarter of fiscal 2018 through the date of this report have increased compared to the prior
year comparable period due primarily to a stronger February film slate that included the blockbuster film Black Panther.
In addition, strong performances from fiscal 2017 holdover films such as Star Wars; The Last Jedi, Jumanji: Welcome
to the Jungle and The Greatest Showman, as well as new films such as Fifty Shades Freed, Peter Rabbit,
and A Wrinkle in Time have contributed positively to our early fiscal 2018 results. Comparisons for the remainder of the
quarter are expected to be difficult due to the strong performance of Beauty and the Beast in mid-March last year. The
expected film slate for the remainder of fiscal 2018 includes films from well-known series such as Avengers: Infinity War,
Solo: A Star Wars Story, Deadpool 2, The Incredibles 2, Jurassic World: Fallen Kingdom, Ant Man
and the Wasp, Hotel Transylvania 3, Mamma Mia! Here We Go Again, Mission: Impossible – Fallout,
Mulan, Fantastic Beasts: The Crimes of Grindelwald, Aquaman and Mary Poppins Returns. Generally, an
increase in the quantity of films released, particularly from the seven major studios, increases the potential for more blockbusters
in any given year, as does an increase in the quantity of films from established film series such as those listed above.

Fiscal
2016 versus Fiscal 2015C

Our theatre division fiscal
2016 revenues and operating income increased by 7.0% and 14.1%, respectively, compared to fiscal 2015C due primarily to an increase
in total theatre attendance at comparable theatres, an increase in our average ticket price, our continued expansion of non-traditional
food and beverage items in our theatres, and an increase in pre-show advertising income, partially offset by the fact that fiscal
2015C included an additional week of operations. The additional week of operations, which included the week between Christmas and
New Year’s Day in 2014 (historically, one of the busiest weeks of the year), contributed approximately $10.7 million and
$4.2 million, respectively, to our theatre division revenues and operating income during fiscal 2015C. Excluding the additional
week from our fiscal 2015C results, we estimate that our fiscal 2016 theatre division revenues and operating income would have
increased by 10.9% and 22.2%, respectively, compared to a comparable 52-week year (including the acquired Wehrenberg theatres).
Excluding the acquired Wehrenberg theatres during fiscal 2016 and the additional week of operations during fiscal 2015C, fiscal
2016 theatre division revenues increased 9.1% and operating income increased 22.9% compared to the prior year comparable theatres
during a comparable 52-week year.

On December 16, 2016, we
acquired 14 owned and/or leased movie theatres in Missouri, Iowa, Illinois and Minnesota, along with Ronnie’s Plaza,
an 84,000 square foot retail center in St. Louis, Missouri, from Wehrenberg and its affiliated entities for a purchase price of
approximately $65 million, plus normal closing adjustments and less a negative net working capital balance that we assumed in the
transaction. We funded the transaction using available borrowings under our existing credit facility. In conjunction with this
transaction, we acquired the underlying real estate for six of the theatre locations as well as the retail center. The remaining
leased locations include several leases that have been classified as capital leases. Nine of the 14 acquired Wehrenberg theatres
operate in the greater St. Louis area. The Wehrenberg theatres contributed approximately $5.1 million and $(450,000), respectively,
to our theatre division revenues and operating income for the two weeks that we owned them during fiscal 2016. The operating loss
from the acquired theatres is due to approximately $2.0 million in one-time acquisition related expenses.

Total theatre attendance
increased 1.9% during fiscal 2016 compared to fiscal 2015C. Excluding the recently acquired Wehrenberg theatres during fiscal 2016
and the additional week of operations during fiscal 2015C, fiscal 2016 attendance at our comparable theatres increased approximately
4.3% compared to the prior year. The following table indicates our percentage change in comparable theatre attendance during each
of the interim periods of fiscal 2016 compared to the same periods during fiscal 2015C. In addition, the table compares the percentage
change in our fiscal 2016 box office revenues (compared to the periods in fiscal 2015C that most closely align to this fiscal year
on the calendar) to the corresponding percentage change in the United States box office receipts during the same periods (as compiled
by us from data received from Rentrak, a national box office reporting service for the theatre industry). For attendance comparison
purposes, percentage change data noted for the fourth quarter and total columns exclude the recently acquired Wehrenberg theatres
during fiscal 2016 and the additional week of operations during fiscal 2015C. For comparisons to the national box office, we compared
each quarter’s Marcus box office revenues (excluding the acquired theatres) to the weeks in fiscal 2015C that most closely
align to this fiscal year on the calendar, including 13 weeks during the fourth quarter and 52 weeks for the total, in order to
compare the same number of weeks:

46

Change F16 v. F15C

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Total

Pct. change in Marcus theatre attendance

+2.3%

-6.9

%

+14.7%

+1.0%

+4.3%

Pct. change in Marcus box office revenues

+19.1%

-5.9

%

+25.2%

+3.2%

+8.2%

Pct. change in U.S. box office revenues

+13.3%

-10.4

%

+14.7%

-5.8

%

+1.8%

Marcus outperformance v. U.S.

+5.8 pts

+4.5 pts

+10.5 pts

+9.0 pts

+6.4 pts

We outperformed the industry
during fiscal 2016 by over six percentage points. We believe our continued outperformance of the industry is attributable to the
investments we have made in new features and amenities in select theatres and our implementation of innovative operating and marketing
strategies that have increased attendance, including our $5 Tuesday promotion and our customer loyalty program (all of which are
described in the “Current Plans” section of this MD&A).

Theatre attendance and
corresponding box office revenues vary significantly from quarter to quarter due to a variety of factors. As evidenced by the change
in United States box office revenues, our fiscal 2016 first and third quarter box office revenues and attendance were impacted
by a stronger slate of movies compared to the same quarters during fiscal 2015C. Conversely, our fiscal 2016 second and fourth
quarter box office revenues and attendance were impacted by a weaker slate of movies compared to the same quarters during fiscal
2015C. Comparisons to the second quarter of fiscal 2015C were negatively impacted by the fact that Easter (a historically strong
period for movies) was in March during fiscal 2016 and in April during fiscal 2015C. In addition, fiscal 2015C second quarter results
were favorably impacted by one of the highest grossing domestic films of all time – Jurassic World. Comparisons to
the fourth quarter of fiscal 2015C were negatively impacted by the fact that the prior year fourth quarter included the highest
grossing domestic film of all time, Star Wars: The Force Awakens, although the strong performance of Rogue One: A Star
Wars Story during the fourth quarter of fiscal 2016 lessened the impact of that difficult comparison.

Conversely, a stronger
slate of movies during the first quarter of fiscal 2016, including the surprise hit Deadpool and the strong holdover from
Star Wars: The Force Awakens, and during the third quarter of fiscal 2016, including strong animated films Finding Dory
and The Secret Life of Pets, contributed to the significant improvement in attendance and box office performance during
those periods compared to the same periods of the prior year. We also believe a combination of several additional factors contributed
to our increases in attendance and our above-described industry outperformance. In addition to the $5 Tuesday promotion that continued
to perform better than the prior year comparable period, our fiscal 2016 attendance was favorably impacted by increased attendance
at our theatres that have added our spacious new DreamLounger recliner seating during the past two and one-half years. We also
continue to recognize the benefits of our previously-described customer loyalty program.

We believe that the most
significant factor contributing to variations in theatre attendance during fiscal 2016, as in other periods, was the quantity and
quality of films released during the respective periods compared to the films released during the same periods of the prior year.
Blockbusters accounted for a slightly decreased percentage of our total box office revenues during fiscal 2016, with our top 15
performing films accounting for 43% of our fiscal 2016 box office revenues compared to 44% during fiscal 2015C. The following five
top performing fiscal 2016 films accounted for nearly 20% of the total box office revenues for our circuit: Rogue One: A Star
Wars Story, Finding Dory, The Secret Life of Pets, Deadpool and Captain America: Civil War. The
top two films on this list, Rogue One: A Star Wars Story and Finding Dory, are currently the #7 and #8 highest grossing
domestic films of all time. The fact that the top two performing films during fiscal 2015C, Star Wars: The Force Awakens
and Jurassic World, are currently the #1 and #4 highest grossing domestic films of all time, is an indication that the overall
film slate during fiscal 2016 was less dependent upon one or two films.

47

The quantity of wide-release
films shown in our theatres and number of wide-release films provided by the seven major studios increased during fiscal 2016 compared
to fiscal 2015C. We played 133 wide-release films (including 33 digital 3D films) at our theatres during fiscal 2016 compared to
113 wide-release films (including 26 digital 3D films) during fiscal 2015C. In total, we played 253 films and 144 alternate content
attractions at our theatres during fiscal 2016 compared to 227 films and 107 alternate content attractions during the prior year
comparable period.

During fiscal 2016, our
average ticket price increased 3.9% compared to fiscal 2015C. Excluding the impact of the Wehrenberg theatres and new screens added
during fiscal 2016, the increase in average ticket price contributed all of the increase in our box office receipts for comparable
theatres during fiscal 2016 compared to fiscal 2015C (including the additional week of operations during fiscal 2015C). The increase
was partially attributable to modest price increases we implemented in January and November 2016. In addition, the fact that we
have increased our number of premium large format (PLF) screens, with a corresponding price premium, also contributed to our increased
average ticket price during fiscal 2016. Conversely, we believe that a change in film product mix had a negative impact on our
average ticket price during fiscal 2016, as two of our top three films during fiscal 2016 were animated family movies (resulting
in a higher percentage of lower-priced children’s tickets sold, compared to more adult-oriented and R-rated films that typically
result in a higher average ticket price), compared to no animated family films among the top four films during fiscal 2015C. The
percentage of our total box office receipts attributable to 3D presentations during fiscal 2016 was similar to the percentage of
our total box office receipts attributable to 3D presentations during fiscal 2015C, meaning that we don’t believe that 3D
films had an impact on our change in average ticket price during fiscal 2016 (a higher percentage of 3D films can result in a higher
average ticket price due to the premium price associated with 3D).

Our average concession
sales per person at comparable theatres (excluding the Wehrenberg theatres) increased 3.2% during fiscal 2016 compared to fiscal
2015C. Pricing, concession/food and beverage product mix and film product mix are the three primary factors that impact our concession
sales per person. A change in concession product mix, including increased sales of higher priced non-traditional food and beverage
items from our increasing number of Take Five Lounges, Zaffiro’s Express and Reel Sizzle outlets, as
well as modest selected price increases we introduced in November 2016, were the primary reasons for our increased average concession
sales per person during fiscal 2016. Conversely, although animated family films generally have a favorable impact on traditional
concession sales, as these types of films typically result in stronger traditional concession sales compared to more adult-oriented
films, we believe that the above described change in film product mix during fiscal 2016 slowed the growth of our overall average
concession sales per person, as animated and family-oriented films tend not to contribute to sales of non-traditional food and
beverage items as much as adult-oriented films. Excluding the impact of the Wehrenberg theatres and new screens added during fiscal
2016, the increase in average concession sales per person contributed all of the increase in our concession revenues for comparable
theatres during fiscal 2016 compared to fiscal 2015C (including the additional week of operations during fiscal 2015C).

48

Operating margin for our
theatre division increased to 21.9% for fiscal 2016, compared to 20.5% for fiscal 2015C. Excluding the additional week of operations,
our fiscal 2015C theatre division operating margin was actually an even lower 19.8%. Our theatre division had an active cost savings
initiative (CSI) in place that achieved cost savings in excess of $2 million during fiscal 2016, favorably impacting our fiscal
2016 operating margin. Increased attendance also generally favorably impacts our operating margin, particularly because the increased
attendance has the effect of increasing our high-margin concession revenues and because fixed expenses become a lower percentage
of revenues. The fact that the percentage of our box office revenues attributable to our highest grossing films did not change
significantly during fiscal 2016 compared to fiscal 2015C contributed to relatively unchanged film costs during fiscal 2016. Higher
grossing blockbuster films have historically had a higher film cost as a percentage of box office revenues than lower grossing
films and, therefore, our operating margin often is negatively impacted when we have a greater number of higher grossing films.
Conversely, if a greater portion of our concession revenues is the result of the sale of non-traditional food and beverage items
that typically have a higher product cost compared to traditional concession items, operating margins may be negatively impacted
to a small extent. Any such impact during fiscal 2016 was offset by the impact of our higher attendance.

Other revenues, which include
management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues and gift card breakage income,
may also impact operating margin. During fiscal 2016, other revenues increased significantly compared to fiscal 2015C due to an
increase in internet surcharge ticketing revenues (primarily as a result of increased advanced ticket sales) and increased pre-show
advertising income. Our agreement with our current advertising provider, Screenvision, included a provision for a one-time incentive
payment if a defined cumulative attendance milestone was reached within a defined time period. We reached this milestone during
our fiscal 2016 fourth quarter. As a result, our operating results during the fourth quarter of fiscal 2016 were favorably impacted
by a significant one-time $3.3 million payment.

We opened two new UltraScreen
DLX auditoriums at an existing theatre in Minnesota in February 2016 and two new screens at an existing theatre in Wisconsin in
November 2016. As noted above, we also opened a new 16-screen theatre in Illinois in October 2016. We did not close any theatres
during fiscal 2016, but we did close two budget-oriented theatres with 13 screens during fiscal 2015C.

Transition
Period versus Prior Year Comparable Period

Our theatre division Transition
Period revenues, operating income and operating margin increased compared to the prior year comparable 30-week period due primarily
to an increase in total theatre attendance at comparable theatres, an increase in our average ticket price, our continued expansion
of non-traditional food and beverage items in our theatres, and the additional week of operations included in our Transition Period
results compared to the prior year comparable period. The additional week of operations, which included the week between Christmas
and New Year’s Eve (historically, one of the busiest weeks of the year), contributed approximately $14.4 million and $5.7
million, respectively, to our theatre division revenues and operating income during the Transition Period compared to the prior
year comparable period.

Total theatre attendance
at comparable theatres increased 18.2% during the Transition Period, including the additional week of operations, and 9.0%, excluding
the additional week, compared to the prior year comparable period. The following table indicates our percentage change in comparable
theatre attendance during each of the interim periods of the Transition Period compared to the same periods during the prior year.
In addition, the table compares the percentage change in our Transition Period box office revenues (compared to the prior year
comparable period) to the corresponding percentage change in the United States box office receipts during the same periods (as
compiled by us from data received from Rentrak, a national box office reporting service for the theatre industry). For attendance
comparison purposes, percentage change data noted for the last five weeks and total columns exclude the additional week of operations.
For comparisons to the national box office, we added the 31st week of fiscal 2015 to our prior year comparable 30-week period box
office revenues in order to compare the same number of weeks:

49

Change TP v. PY

1st Qtr.

2nd Qtr.

5 Weeks

Total

Pct. change in Marcus theatre attendance

+12.8

%

-3.6

%

+31.3

%

+9.0

%

Pct. change in Marcus box office revenues

+16.6

%

-3.2

%

+37.9

%

+13.7

%

Pct. change in U.S. box office revenues

+10.1

%

-2.6

%

+34.5

%

+10.0

%

Marcus outperformance v. U.S.

+6.5

pts

-0.6

pts

+3.4

pts

+3.7

pts

We outperformed the industry
during the Transition Period by nearly four percentage points. We believe our performance during the second quarter of the Transition
Period was negatively impacted by a significant number of screens out of service for upgrades during the period. Despite the screens
out of service, we would have outperformed the industry during the second quarter of the Transition Period if not for a difficult
comparison for one particular week during the period. We believe that comparisons to that particular week in October were negatively
impacted by the fact that there was not a Green Bay Packers game during that weekend in the prior year comparable period. In our
largest revenue-generating state, Wisconsin, the timing of Packers football games can make a difference in weekly year-over-year
comparisons. We believe this outperformance of others in the industry is attributable to the investments we have made in new features
and amenities in select theatres and our implementation of innovative operating and marketing strategies that have increased attendance,
including our $5 Tuesday promotion and our new customer loyalty program (all of which are described in the “Current Plans” section
of this MD&A).

Theatre attendance and
corresponding box office revenues vary significantly from quarter to quarter due to a variety of factors. As evidenced by the change
in United States box office revenues, our Transition Period second quarter box office revenues and attendance were impacted by
a weaker slate of movies compared to the prior year comparable period. We also believe a combination of several additional factors
contributed to this decrease in attendance during the second quarter of the Transition Period. To position our theatre circuit
to maximize the benefits of the release of Star Wars: The Force Awakens in December 2015, we had an unprecedented number
of screens out of service as we continued to make major upgrades to selected theatres. A total of 17 of our largest auditoriums
were out of service for varying portions of the second quarter of the Transition Period as we increased the number of UltraScreen
DLX and SuperScreen DLX premium large format screens in our circuit. In addition, another 15 screens were out of service
at selected theatres for varying portions of the second quarter of the Transition Period as we added our spacious DreamLounger
electric all-recliner seating to additional theatres.

Conversely, a stronger
slate of summer movies during the first quarter, and the record performance of Star Wars: The Force Awakens during the last
five weeks of the Transition Period contributed to the significant improvement in attendance and box office performance during
those periods compared to the same periods of the prior year. We also believe a combination of several additional factors contributed
to this significant increase in attendance and our above-described industry outperformance. In addition to the $5 Tuesday promotion
that continued to perform better than the prior year comparable period, our Transition Period attendance was favorably impacted
by increased attendance at 14 theatres that have added our spacious new DreamLounger electric all-recliner seating during the past
two and one-half years. We also believe that we were beginning to recognize the benefits of our previously-described customer loyalty
program.

We believe that the most
significant factor contributing to variations in theatre attendance during the Transition Period, as in other periods, was the
quantity and quality of films released during the respective periods compared to the films released during the same periods of
the prior year. Blockbusters accounted for an increased percentage of our total box office revenues during the Transition Period,
with our top 15 performing films accounting for 58% of our Transition Period box office revenues compared to 50% during the comparable
period of fiscal 2015. The following five top performing Transition Period films accounted for over 35% of the total box office
revenues for our circuit: Star Wars: The Force Awakens, Jurassic World, Inside Out, Minions and The
Hunger Games: Mockingjay – Part 2. The top two films on this list, Star Wars and Jurassic World, are currently
the #1 and #4 highest grossing domestic films of all time.

50

The quantity of wide-release
films shown in our theatres and number of wide-release films provided by the seven major studios did not change significantly during
the Transition Period compared to the prior year comparable period. We played 70 wide-release films (including 17 digital 3D films)
at our theatres during the Transition Period compared to 72 wide-release films (including 17 digital 3D films) during the prior
year comparable period. In total, we played 145 films and 75 alternate content attractions at our theatres during the Transition
Period compared to 143 films and 47 alternate content attractions during the prior year comparable period.

During the Transition
Period, our average ticket price increased 3.5% compared to the prior year comparable period. The increase in average ticket price
contributed approximately $2.9 million, or 27%, of the increase in our box office receipts during the Transition Period compared
to the prior year comparable period, excluding the impact of the additional week of operations. The increase was partially attributable
to modest price increases we implemented in mid-October 2014, particularly at our DreamLounger recliner seating locations. In
addition, the fact that we have increased our number of premium large format (PLF) screens, with a corresponding price premium,
also contributed to our increased average ticket price. The percentage of our total box office receipts attributable to 3D presentations
also increased during the Transition Period compared to the prior year comparable period due primarily to a higher than average
3D performance from our top two films, Star Wars: The Force Awakens and Jurassic World, contributing to our higher
average ticket price. The combination of the increase in our PLF screens and the impact of 3D pricing for Star Wars contributed
to an increase in our average ticket price of 6.5% during the last five weeks of the Transition Period. Conversely, we believe
that a change in film product mix had a slight negative impact on our average ticket price during the Transition Period, as two
of our top four films for the Transition Period were animated family movies (resulting in a higher percentage of lower-priced
kids tickets sold, compared to more adult-oriented and R-rated films that typically result in a higher average ticket price).

Our average concession
sales per person increased 10.7% during the Transition Period compared to the prior year comparable period. Pricing, concession/food
and beverage product mix and film product mix are the three primary factors that impact our concession sales per person. Selected
price increases introduced in mid-October 2014 and a change in concession product mix, including increased sales of higher priced
non-traditional food and beverage items from our increasing number of Take Five Lounges, Zaffiro’s Express
and Reel Sizzle outlets and Big Screen Bistros, were the primary reasons for our increased average concession sales
per person during the Transition Period. In addition, the fact that two of our top four films during the first quarter of the Transition
Period were animated family movies (Inside Out and Minions), compared to a film slate during the first quarter of
the comparable prior year period that was lacking in strong family-oriented movies, also likely contributed to a larger (13.1%)
increase in concession sales per person during the first quarter of the Transition Period. These types of films typically result
in stronger concession sales compared to more adult-oriented films. The increase in average concession sales per person contributed
approximately $6.1 million, or approximately 56%, of the increase in our concession revenues for comparable theatres during the
Transition Period compared to the prior year comparable period, excluding the impact of the additional week of operations.

51

Our theatre division’s
operating margin increased to 20.3% during the Transition Period, compared to 19.1% for the prior year comparable period. Excluding
the additional week of operations, our Transition Period theatre division operating margin actually decreased slightly to 18.7%.
Increased attendance generally favorably impacts our operating margin, particularly because the increased attendance has the effect
of increasing our high-margin concession revenues and because fixed expenses become a lower percentage of revenues. Conversely,
the fact that a higher percentage of our box office revenues were attributable to our highest grossing films contributed to higher
film costs during the Transition Period, resulting in the decreased operating margin for the Transition Period after the additional
week is excluded. Higher grossing blockbuster films historically have a higher film cost as a percentage of box office revenues
than lower grossing films and, therefore, our operating margin often is negatively impacted when we have a greater number of higher
grossing films. In addition, if a greater portion of our concession revenues is the result of the sale of non-traditional food
and beverage items that typically have a higher product cost compared to traditional concession items, operating margins may be
negatively impacted to a small extent. Any such impact during the Transition Period was offset by the impact of our higher attendance.
Other revenues, which include management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues
and gift card breakage income, also can impact operating margin. During the Transition Period, other revenues increased significantly
compared to the prior year comparable period due to increased advertising income and significantly increased surcharge revenues
(primarily as a result of advanced ticket sales for Star Wars: The Force Awakens).

As noted above, we opened
our newest theatre, the 12-screen Marcus Palace Cinema, on April 30, 2015. At the same time, we closed a nearby 16-screen theatre,
resulting in a net decrease of four screens. The new theatre is significantly outperforming the theatre it replaced, even with
fewer screens, so we did not adjust any of our comparative numbers referenced earlier for the fact that we have fewer screens.
We closed one six-screen budget-oriented theatre early in the second quarter of the Transition Period, and we closed one seven-screen
budget-oriented theatre in early December 2015.

Fiscal
2015 versus Fiscal 2014

Our theatre division fiscal
2015 revenues and operating income increased compared to the prior year due primarily to an increase in total theatre attendance
at comparable theatres and our continued expansion of non-traditional food and beverage items in our theatres, partially offset
by a decrease in our average ticket price. Despite the fact that our operating income and operating margin for fiscal 2015 were
negatively impacted by $319,000 in impairment charges related to several closed theatres and approximately $950,000 of one-time
preopening expenses related to the opening of new theatres and amenities, our fiscal 2015 revenues and operating income were records
for this division. Our operating income and operating margin for fiscal 2014 were negatively impacted by approximately $475,000
of additional snow removal costs and $475,000 of additional heating costs, both as a result of unusually harsh winter weather that
year.

Total theatre attendance
increased 12.1% during fiscal 2015 compared to the prior year. The following table indicates our percentage change in comparable
theatre attendance during each of the four quarters of fiscal 2015 compared to the same quarters during the prior year. In addition,
the table compares the percentage change in our fiscal 2015 quarterly box office revenues (compared to the prior year) to the corresponding
percentage change in the United States box office receipts during the same periods (as compiled by us from data received from Rentrak,
a national box office reporting service for the theatre industry):

Change F15 v. F14

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Total

Pct. change in Marcus theatre attendance

+9.9

%

+25.6

%

+7.5

%

+9.8

%

+12.1

%

Pct. change in Marcus box office revenues

-1.8

%

+17.2

%

+8.3

%

+10.7

%

+7.7

%

Pct. change in U.S. box office revenues

-12.7

%

+0.4

%

+0.5

%

+1.1

%

-3.7

%

Marcus outperformance v. U.S.

+10.9

pts

+16.8

pts

+7.8

pts

+9.6

pts

+11.4

pts

We outperformed the industry
during fiscal 2015 by more than 11 percentage points. Over three-fourths of our company-owned, first-run theatres outperformed
the industry average during fiscal 2015. We believe this performance is attributable to the investments we have made in new features
and amenities in select theatres and our implementation of innovative operating and marketing strategies that have increased attendance,
including our $5 Tuesday promotion and our new customer loyalty program (all of which are described in the “Current Plans” section
of this MD&A).

52

Theatre attendance and
corresponding box office revenues vary significantly from quarter to quarter due to a variety of factors. We rolled out our $5
Tuesday promotion to our entire circuit in mid-November 2013, so attendance comparisons to the prior year during our first and
second quarters of fiscal 2015 significantly benefited from this program. Conversely, as evidenced by the change in United States
box office revenues, our fiscal 2015 first quarter box office and attendance were impacted by a weaker slate of summer movies compared
to the prior year. Moreover, with the United States box office declining 3.7% during our fiscal 2015, we believe we can conclude
that the overall film slate during fiscal 2015 was weaker than fiscal 2014. The fact that we reported record revenues and operating
income during fiscal 2015 in the face of this weaker film slate further accentuates the success of our previously described strategies.

We believe that the most
significant factor contributing to variations in theatre attendance during fiscal 2015, as in other years, was the quantity and
quality of films released during the respective quarters compared to the films released during the same quarters of the prior
year. Blockbusters accounted for a slightly decreased percentage of our total box office revenues during fiscal 2015, with our
top 15 performing films accounting for 38% of our fiscal 2015 box office revenues compared to 39% during fiscal 2014. We believe
one of the reasons why blockbusters accounted for a slightly lower percentage of our total box office is because our $5 Tuesday
program has increased movie-going frequency among our customers, which we believe benefited the next tier of films after the blockbusters.
The following five top performing fiscal 2015 films accounted for over 18% of the total box office revenues for our circuit: American
Sniper, Avengers: Age of Ultron, The Hunger Games: Mockingjay – Part 1, Furious 7 and Guardians
of the Galaxy.

The quantity of wide-release
films shown in our theatres and number of wide-release films provided by the seven major studios decreased during fiscal 2015.
We played 113 wide-release films (including 25 digital 3D films) at our theatres during fiscal 2015 compared to 124 wide-release
films (including 37 digital 3D films) during fiscal 2014. In total, we played 225 films and 80 alternate content attractions at
our theatres during fiscal 2015 compared to 176 films and 51 alternate content attractions during fiscal 2014.

During fiscal 2015, our
average ticket price decreased 3.9% compared to the prior year, attributable primarily to the introduction of our $5 Tuesday pricing
promotion for all movies implemented during the second half of fiscal 2014. We do not believe that changes in film product mix
had a significant impact on our average ticket price during fiscal 2014. In mid-October 2014, we introduced our first selected
admission price increases to our theatres since April 2013, which favorably impacted our average ticket price during the third
and fourth quarters of fiscal 2015. Our price increases were generally modest, as we continue to be sensitive to the favorable
price-value proposition we have established, although we did increase some prices at our DreamLounger recliner seating locations
by approximately $0.50-$0.75 per ticket during fiscal 2015. As a result, and after the $5 Tuesday promotion had been in place for
a full year, our average ticket price increased 0.7% and 0.9% during the third and fourth quarters of fiscal 2015, respectively,
compared to the third and fourth quarters of fiscal 2014. It should be noted that our Tuesday attendance continued to increase
in our second year of the program, which likely has had the effect of reducing our average ticket price increases.

Our average concession
sales per person increased 4.9% during fiscal 2015 compared to the prior year. Pricing, concession/food and beverage product mix
and film product mix are the three primary factors that impact our concession sales per person. Selected price increases introduced
in mid-October 2014 and a change in concession product mix, including increased sales of higher priced non-traditional food and
beverage items from our increasing number of Take Five Lounges, Zaffiro’s Express outlets and Big Screen
Bistros, were the primary reasons for our increased average concession sales per person during fiscal 2015, partially offset
by the impact of the $5 Tuesday free popcorn promotion described in the “Current Plans” section of this MD&A during the first
two quarters of the year. After the $5 Tuesday promotion had been in place for a full year, our average concession sales per person
increased 11.2% and 9.3% during the third and fourth quarters of fiscal 2015, respectively, compared to the third and fourth quarters
of fiscal 2014. The fact that none of our top five films during fiscal 2015 were animated family movies, compared to three of our
top five films during fiscal 2014 (Frozen, Despicable Me 2 and The Lego® Movie), likely contributed to
a smaller increase in concession sales per person during fiscal 2015, as these types of films typically result in stronger concession
sales compared to more adult-oriented films. The increase in average concession sales per person contributed approximately $4.6
million, or approximately 31%, of the increase in our concession revenues for comparable theatres during fiscal 2015 compared to
the prior year.

53

Our theatre division’s
operating margin increased to 19.9% during fiscal 2015, compared to 19.1% for fiscal 2014. Increased attendance generally favorably
impacts our operating margin, particularly because the increased attendance has the effect of increasing our high-margin concession
revenues and because fixed expenses become a lower percentage of revenues. Other revenues, which include management fees, pre-show
advertising income, family entertainment center revenues and gift card breakage income, also can impact operating margin, although
during fiscal 2015, other revenues were essentially even compared to the prior year. The fact that the percentage of our box office
revenues attributable to our highest grossing films was relatively stable compared to the prior year meant that film costs during
fiscal 2015 were also relatively stable as a percentage of box office revenues compared to the prior year, resulting in no impact
on our fiscal 2015 margins compared to the prior year. Higher grossing blockbuster films historically have a higher film cost as
a percentage of box office revenues than lower grossing films and, therefore, our operating margin often is negatively impacted
when we have a greater number of higher grossing films. In addition, if a greater portion of our concession revenues is the result
of the sale of non-traditional food and beverage items that typically have a higher product cost compared to traditional concession
items, operating margins may be negatively impacted to a small extent. Any such impact during fiscal 2015 was offset by the impact
of our higher attendance.

As noted above, we opened
our newest theatre, the 12-screen Marcus Palace Cinema, on April 30, 2015. At the same time, we closed a nearby 16-screen theatre,
resulting in a net decrease of four screens. The new theatre is significantly outperforming the theatre it replaced, even with
less screens, so we did not adjust any of our comparative numbers referenced earlier for the fact that we have fewer screens.

Hotels and
Resorts

The hotels and
resorts division contributed: (i) 35.5% of our consolidated revenues and 13.7% of our consolidated operating income,
excluding corporate items, during fiscal 2017, compared to 39.6% and 16.9%, respectively, during fiscal 2016 and 42.2% and
17.2%, respectively, during fiscal 2015C; (ii) 43.5% and 31.8%, respectively, during the Transition Period, compared to 48.1%
and 34.7%, respectively, during the prior year comparable period; and (iii) 44.7% and 16.2%, respectively, during fiscal
2015, compared to 45.6% and 25.7%, respectively, during fiscal 2014. As of December 28, 2017, the hotels and resorts division
owned and operated three full-service hotels in downtown Milwaukee, Wisconsin, a full-facility destination resort in Lake
Geneva, Wisconsin and full-service hotels in Madison, Wisconsin, Chicago, Illinois, Lincoln, Nebraska and Oklahoma City,
Oklahoma (we have a majority-ownership position in the Oklahoma City, Oklahoma hotel). In addition, the hotels and resorts
division managed 10 hotels, resorts and other properties for other owners. Included in the 10 managed properties is one hotel
owned by a joint venture in which we have a minority interest and two condominium hotels in which we own the public space.
The following tables set forth revenues, operating income, operating margin and rooms data for the hotels and resorts
division for fiscal 2017, fiscal 2016, the unaudited prior year comparable 53-week period ended December 31, 2015 (F2015C),
the Transition Period (TP), the unaudited prior year comparable 30-week period ended December 25, 2014 (PY), and the prior
two fiscal years:

54

Change F17 v. F16

Change F16 v. F15C

F2017

F2016

Amt.

Pct.

F2015C

Amt.

Pct.

(in millions, except percentages)

Revenues

$

220.9

$

215.2

$

5.7

2.6

%

$

224.5

$

(9.3

)

-4.1

%

Operating income

$

12.7

$

14.6

$

(1.9

)

-12.7

%

$

13.0

$

1.6

12.0

%

Operating margin

5.8

%

6.8

%

5.8

%

Change TP v. PY

TP

PY

Amt.

Pct.

(in millions, except percentages)

Revenues

$

141.1

$

135.0

$

6.1

4.5

%

Operating income

$

17.3

$

14.7

$

2.6

17.7

%

Operating margin

12.3

%

10.9

%

Change F15 v. F14

F2015

F2014

Amt.

Pct.

(in millions, except percentages)

Revenues

$

218.3

$

204.1

$

14.2

7.0

%

Operating income

$

10.3

$

16.1

$

(5.8

)

-35.8

%

Operating margin

4.7

%

7.9

%

Available rooms at period-end

F2017

F2016

TP

F2015

F2014

Company-owned

2,629

2,600

2,600

2,817

2,817

Management contracts with joint ventures

333

611

683

683

611

Management contracts with condominium hotels

480

480

480

480

480

Management contracts with other owners

1,399

1,231

1,231

1,231

1,231

Total available rooms

4,841

4,922

4,994

5,211

5,139

Fiscal
2017 versus Fiscal 2016

Our hotels and resorts
division revenues increased 2.6% during fiscal 2017 compared to fiscal 2016 due primarily to increased food and beverage revenues
from our new SafeHouse restaurant and bar in Chicago, Illinois that we opened on March 1, 2017, increased room revenues
at the Grand Geneva Resort & Spa due to our addition of 29 new all-season villas in May 2017, increased room revenues at our
other existing company-owned hotels, and increased other revenues from our EscapeHouse Chicago and in-house web design
and laundry businesses, partially offset by a small decrease in management fee revenues. Excluding the SafeHouse Chicago,
EscapeHouse Chicago and management company revenues from both years, our comparable hotels and resorts revenues increased
1.6% during fiscal 2017 compared to fiscal 2016.

Hotels and resorts division
operating income and operating margin decreased by 12.7% and one percentage point (from 6.8% to 5.8%), respectively, during fiscal
2017 compared to fiscal 2016 due entirely to preopening expenses and startup operating losses related to the new SafeHouse
Chicago and a reduction in profits from our management business (due in part to a small one-time favorable adjustment during the
prior year). Excluding these two items, operating income for our hotels and resorts division during fiscal 2017 actually exceeded
operating income during fiscal 2016 by approximately $200,000, or 1.7%. Excluding these same items, our operating margin during
both fiscal 2017 and fiscal 2016 was 5.3%. A small increase in revenue per available room for comparable hotels during fiscal 2017
contributed to the improved operating results for comparable hotels.

55

The following table sets
forth certain operating statistics, including our average occupancy percentage (number of occupied rooms as a percentage of available
rooms), our average daily room rate, or ADR, and our total revenue per available room, or RevPAR, for company-owned properties:

Change F17 v. F16

Operating Statistics(1)

F2017

F2016

Amt.

Pct.

Occupancy percentage

74.4

%

73.9

%

0.5

pts

0.7

%

ADR

$

148.07

$

147.67

$

0.40

0.3

%

RevPAR

$

110.17

$

109.16

$

1.01

0.9

%

(1)

These operating statistics represent averages of our
comparable eight distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide
range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort.

RevPAR increased at four
of our eight comparable company-owned properties during fiscal 2017 compared to fiscal 2016. According to data received from Smith
Travel Research and compiled by us in order to analyze our fiscal 2017 results, comparable “upper upscale” hotels throughout
the United States experienced an increase in RevPAR of 0.6% during fiscal 2017. Data received from Smith Travel Research for our
various “competitive sets” – hotels identified in our specific markets that we deem to be competitors to our
hotels – indicates that these hotels experienced a decrease in RevPAR of 3.0% during fiscal 2017. We believe our RevPAR increases
during fiscal 2017 exceeded the United States results by 0.3 percentage points and competitive set results by 3.9 percentage points
partially due to our success replacing some of the decline in group business with an increase in non-group business. The following
table sets forth the change in our average occupancy percentage, ADR and RevPAR for each quarterly period of fiscal 2017 compared
to fiscal 2016. For comparison purposes, all statistics exclude the Hotel Phillips:

Change F17 v. F16

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Occupancy percentage

3.1

pts

-2.0

pts

-0.1

pts

0.9

pts

ADR

-0.3

%

1.1

%

-0.4

%

1.4

%

RevPAR

4.4

%

-1.5

%

-0.4

%

2.7

%

As indicated in the table
above, our RevPAR performance was much stronger during the first and fourth quarters of fiscal 2017 compared to the second and
third quarters of fiscal 2017, driven primarily by variations in group business during each quarter. Our company-owned hotels,
and in particular our largest hotels, derive a significant portion of their revenues from group business, and as a result, we are
more susceptible to variations in RevPAR from quarter to quarter depending upon the strength of the group business market during
that particular quarter. Group business also tends to have an impact on our food and beverage revenues as well, since groups are
more likely to use our banquet and catering services during their stay. As indicated in the quarterly results above, reduced group
business negatively impacted several of our hotels during the second and third quarters of fiscal 2017 and increased group business
favorably impacted several of our hotels during the first and fourth quarters of fiscal 2017 compared to the same periods in fiscal
2016. A particular challenge during the fiscal 2017 third quarter was a decrease in group sales productivity in which an unusually
high number of groups contributed less actual rooms sold than were originally booked. We believe the reduced group occupancy during
the second and third quarters of fiscal 2017 does not necessarily reflect a larger trend, but rather was related to difficult comparisons
to the prior year during several months at those particular properties. We base that conclusion in part on the fact that, as of
the date of this report, our group room revenue bookings for future periods in fiscal 2018 – something commonly referred
to in the hotels and resorts industry as “group pace” – are ahead of our group room revenue bookings for future
periods as of March 14, 2017. Banquet and catering revenue pace for fiscal 2018 is also currently ahead of where we were last year
at this same time.

56

Our overall ADR increase
in fiscal 2017 was partially the result of our addition of 29 new all-season villas at the Grand Geneva Resort & Spa. These
villas are generally higher-priced than other rooms at the Grand Geneva Resort & Spa. Conversely, due to the challenges in
group productivity during the fiscal 2017 third quarter, we elected to accept a lower ADR in some situations to obtain additional
non-group business. In addition, during our fiscal 2017 first quarter, our focus was on increasing occupancy, often at the expense
of ADR (it is generally more difficult to increase ADR during our slower winter season, as overall occupancy is at its lowest).
As a result, only three of our eight comparable company-owned properties reported increased ADR during fiscal 2017 compared to
fiscal 2016.

Group business also has
an impact on our ADR. Typically, when we have substantial blocks of rooms committed to group business, we are able to raise rates
with non-group business. Conversely, leisure customers tend to be very loyal to online travel agencies, which is one of the reasons
why we continue to experience some rate pressure. While we have been selective in choosing the online portals to which we grant
access to our inventory, such portals are part of the booking landscape today, and our goal is to use them in the most efficient
way possible.

Many published reports
by those who closely follow the hotel industry suggest that the United States lodging industry will continue to achieve slow but
steady growth in RevPAR in calendar 2018. There also appears to be some recent improvement in sentiment regarding the possible
positive impact that recent regulatory and tax reforms may have on our business customers, which may result in increased business
travel in the future. Whether the relatively positive trends in the lodging industry over the last several years will continue
depends in large part on the economic environment, as hotel revenues have historically tracked very closely with traditional macroeconomic
statistics such as the Gross Domestic Product. We also continue to monitor hotel supply in our markets, as increased supply without
a corresponding increase in demand may have a negative impact on our results.

We generally expect our
favorable revenue trends to continue in future periods and to track or exceed the overall industry trends, particularly in our
respective markets. As noted above, we are encouraged by the fact that our group booking pace as of the date of this report is
ahead of our group booking pace as of March 14, 2017. The SafeHouse Chicago has now completed its first year of operation
and we expect to report continued improvement in that restaurant’s operating results during fiscal 2018. We also expect to
see continued benefit in future periods from the new villas at the Grand Geneva Resort & Spa. Conversely, several of our markets,
including Oklahoma City, Oklahoma, Chicago, Illinois and Milwaukee, Wisconsin, have experienced an increase in room supply that
may be an impediment to any substantial increases in ADR in the near term. We believe that our hotels are less impacted by additional
room supply than other hotels in the markets in which we compete, particularly in the Milwaukee market, due in large part to recent
renovations that we have made to our hotels. The timing and possible disruption of business from our planned renovations at the
InterContinental Milwaukee hotel and the Hilton Madison at Monona Terrace (as discussed in the “Current Plans” section
of this MD&A) may also have a slight negative impact on the results of those two hotels during fiscal 2018.

As we continue to increase
our visibility as a national hotel management company, we believe that one of our major strengths is the established infrastructure
we bring to hotel owners and developers. This includes our highly-regarded web development team that has produced nationally recognized
websites, mobile apps and social media campaigns. Late in our fiscal 2016 first quarter, we established a new business unit named
Graydient Creative that focuses on extending this experience to other companies in the hospitality, retail, theatre and entertainment
industries and we expect to see continued growth in this business during fiscal 2018. In addition, during our fiscal 2016 fourth
quarter, we expanded the capacity of our wholly-owned laundry facility, Wisconsin Hospitality Linen Service (WHLS), to increase
our ability to provide laundry services to a growing number of hotels and other hospitality businesses seeking to out-source these
services and we expect to continue to grow that business as well. We include the results of Graydient Creative and WHLS in our
reported results for our hotels and resorts division.

57

During fiscal
2017, we ceased management of the Sheraton Madison Hotel in Madison, Wisconsin and sold our 15% minority ownership interest
in the property for a gain of approximately $300,000. Early in the fourth quarter of fiscal 2017, we ceased management of
The Westin® Atlanta Perimeter North in Atlanta, Georgia and sold our 11% minority interest in the property for a
substantial gain of approximately $4.9 million. Conversely, during fiscal 2017, we began managing the new Omaha Marriott
Downtown at The Capitol District hotel in Omaha, Nebraska and the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina.
In January 2018, we assumed management of the newly-opened Murieta Inn and Spa in Rancho Murieta, California. As a result,
absent significant additional additions or subtractions from our managed hotel portfolio (which we have none presently), we
do not expect these changes to our outside management fees to have a significant impact on our fiscal 2018 financial
results.

As discussed in the “Current
Plans” section of this MD&A, we are considering a number of potential growth opportunities that may impact fiscal 2018
operating results. If we were to sell one or more hotels during fiscal 2018, our fiscal 2018 operating results could be significantly
impacted. The extent of any such impact will likely depend upon the timing and nature of the growth opportunity (pure management
contract, management contract with equity, joint venture investment, or other opportunity) or divestiture (management retained,
equity interest retained, etc.).

In October 2017, Joe Khairallah
submitted his resignation as division President and Chief Operating Officer of Marcus Hotels and Resorts to pursue global opportunities.
We are grateful for his contributions to our company during the past four years. Greg Marcus, our President and Chief Executive
Officer, has assumed operational oversight of this division as we evaluate our future leadership needs, supported by a strong and
experienced senior leadership team.

Fiscal
2016 versus Fiscal 2015C

Our hotels and resorts
division revenues decreased 4.1% during fiscal 2016 compared to fiscal 2015C due to the negative impact on total revenues resulting
from our sale of the Hotel Phillips in October 2015, the fact that fiscal 2015C included an additional week of operations and decreased
food and beverage revenues at our remaining company-owned hotels, partially offset by increased room revenues at our remaining
eight company-owned hotels. The additional week of operations contributed approximately $3.4 million to our hotels and resorts
division revenues during fiscal 2015C. The fact that fiscal 2016 ended on December 29 and did not include New Year’s Eve,
which is historically a strong holiday for many of our hotels, while fiscal 2015C included two New Year’s Eves in its 53-week
year, contributed to the decline in food and beverage revenues during fiscal 2016. Conversely, our acquisition of the SafeHouse
restaurant in June 2015 favorably impacted hotels and resorts division food and beverage revenues during fiscal 2016 as compared
to fiscal 2015C. Excluding the SafeHouse from both years and the Hotel Phillips and additional week of operations from fiscal
2015C, our comparable hotels and resorts revenues increased 0.4% during fiscal 2016 compared to fiscal 2015C.

Hotels and resorts division
operating income and operating margin increased by 12.0% and one percentage point (from 5.8% to 6.8%), respectively, during fiscal
2016 compared to fiscal 2015C due primarily to strong cost controls, increased revenue per available room for comparable hotels
during fiscal 2016, the fact that fiscal 2015C included a $2.6 million impairment charge related to one specific hotel and from
the fact that, during the majority of the first half of fiscal 2015C, our AC Hotel Chicago Downtown was undergoing a major renovation
and was operating without a brand. Conversely, comparisons of fiscal 2016 operating income and operating margin from our hotels
and resorts division to fiscal 2015C operating income and operating margin were unfavorably impacted by decreased food and beverage
revenues at our remaining company-owned hotels, the fact that fiscal 2015C included an additional week of operations, and the negative
impact on total operating income resulting from our sale of the Hotel Phillips in October 2015, along with subsequent legal expenses
in fiscal 2016 related to a dispute with the city of Kansas City regarding our right to receive future tax incremental funding
proceeds generated by that hotel. The additional week of operations contributed approximately $500,000 to our hotels and resorts
division operating income during fiscal 2015C. Excluding the SafeHouse and Hotel Phillips from both years, as well as the
additional week of operations and the aforementioned impairment charge from fiscal 2015C, our comparable hotels and resorts division
operating income increased 7.1% during fiscal 2016 compared to fiscal 2015C. Excluding these same items, our operating margin during
fiscal 2016 was 7.4% compared to an operating margin of 6.9% during fiscal 2015C. Our strong cost controls during fiscal 2016 are
evidenced by the fact that approximately 131% of our revenue increase during fiscal 2016 compared to fiscal 2015C flowed through
to our operating income during fiscal 2016 (after adjusting for the items noted above), compared to a 50% flow through that we
typically target.

These operating statistics represent averages of our
comparable eight distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide
range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort.

RevPAR increased at seven
of our eight comparable company-owned properties during fiscal 2016 compared to fiscal 2015C. According to data received from Smith
Travel Research and compiled by us in order to analyze our fiscal 2016 results, comparable “upper upscale” hotels throughout
the United States experienced an increase in RevPAR of 2.0% during fiscal 2016. Data received from Smith Travel Research for our
various “competitive sets” – hotels identified in our specific markets that we deem to be competitors to our
hotels – indicates that these hotels experienced an increase in RevPAR of 1.5% during fiscal 2016. We believe our RevPAR
increases during fiscal 2016 exceeded the United States results and competitive set results partially due to our continued emphasis
on increasing our ADR, as described below, partially offset by room supply growth in certain of our markets and a difficult economic
environment in Oklahoma City, Oklahoma, as a result of reduced oil prices. The following table sets forth the change in our average
occupancy percentage, ADR and RevPAR for each quarterly period of fiscal 2016 compared to fiscal 2015C. For comparison purposes,
all statistics exclude the Hotel Phillips:

Change F16 v. F15C

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Occupancy percentage

2.2

pts

1.8

pts

-

-1.1

pts

ADR

1.0

%

4.4

%

2.6

%

-1.2

%

RevPAR

4.4

%

6.9

%

2.7

%

-2.6

%

As indicated in the table
above, our RevPAR performance was much stronger during the first half of fiscal 2016 compared to the second half of fiscal 2016,
driven primarily by increased group and transient business during the first two quarters of the year. Unfortunately, reduced group
business negatively impacted several of our hotels during the third and fourth quarters of fiscal 2016 and resulted in a corresponding
reduction in food and beverage revenues during the second half of fiscal 2016 compared to the second half of fiscal 2015C. We believe
the second half of fiscal 2016 may have been impacted by uncertainty regarding the presidential election and concerns about the
economic environment. We also believe the reduced group occupancy during the second half of fiscal 2016 was related to difficult
comparisons to the prior year during several months at those particular properties.

59

Our overall ADR increase
in fiscal 2016 was the direct result of a strategy at several hotels to emphasize rate, occasionally at the expense of occupancy.
The additional group business at several of our hotels during the first half of fiscal 2016 allowed us to increase rates for the
remaining available rooms and reduce the number of rooms occupied at discounted rates. As a result, six of our eight comparable
company-owned properties reported increased ADR during fiscal 2016 compared to fiscal 2015C. Our overall ADR increases during fiscal
2016 were impacted, however, by reduced group business during the third and fourth quarters of fiscal 2016 compared to the third
and fourth quarters of fiscal 2015C, resulting in only four of our eight company-owned properties reporting increased ADR during
the second half of fiscal 2016, as we increased the number of rooms occupied at discounted rates during that period.

We completed a renovation
of The Skirvin Hilton hotel in Oklahoma City, Oklahoma, which included all of the guest rooms and key public spaces, during the
third quarter of fiscal 2016. Operating results at this hotel were negatively impacted by the disruption during the renovation.
The AC Hotel Chicago Downtown completed its second year of operation and achieved increased operating performance during fiscal
2016 compared to fiscal 2015C.

As we continue to increase
our visibility as a national hotel management company, we believe that one of our major strengths is the established infrastructure
we bring to hotel owners and developers. This includes our highly-awarded web development team that has produced nationally recognized
websites, mobile apps and social media campaigns. Late in our fiscal 2016 first quarter, we established a new business unit named
Graydient Creative that focuses on extending this experience to other companies in the hospitality, retail, theatre and entertainment
industries. In addition, during our fiscal 2016 fourth quarter, we expanded the capacity of our wholly-owned laundry facility,
Wisconsin Hospitality Linen Service (WHLS), to increase our ability to provide laundry services to a growing number of hotels and
other hospitality businesses seeking to out-source these services. We include the results of Graydient Creative and WHLS in our
reported results for our hotels and resorts division.

In June 2015, we purchased
the SafeHouse in Milwaukee, Wisconsin, adding another restaurant to our portfolio. The addition of this spy-themed Milwaukee
restaurant to our operating results contributed to our increased food and beverage revenues during fiscal 2016 compared to fiscal
2015C, partially offset by the fact that the restaurant was closed for a portion of the fiscal 2016 first quarter for a renovation.
During the fourth quarter of fiscal 2016, we began construction on a new SafeHouse location in Chicago, Illinois and opened
the EscapeHouse Chicago, a complimentary business capitalizing on the popularity of team escape games.

During fiscal 2016,
we ceased management of The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida and sold all but 0.49% of our 10% minority
ownership interest in the property. We have agreed to sell the remaining interest during the next several years. These events did
not significantly impact our financial results during fiscal 2016.

Transition
Period versus Prior Year Comparable Period

Our hotels and resorts
division revenues, operating income and operating margin increased during the Transition Period compared to the prior year comparable
30-week period due primarily to an increase in food and beverage revenues, an increase in our average daily rate, strong cost controls
and the additional week of operations included in our Transition Period results compared to the prior year comparable period. The
additional week of operations contributed approximately $3.0 million and $700,000, respectively, to our hotels and resorts division
revenues and operating income during the Transition Period compared to the prior year comparable period. Conversely, hotels and
resorts division revenues and operating income during the Transition Period were negatively impacted by the sale of the Hotel Phillips
in October 2015.

The following table
sets forth certain operating statistics, including our average occupancy percentage, our ADR, and our RevPAR, for company-owned
properties. For comparison purposes, all statistics for the Transition Period exclude the additional week of operations:

60

Change TP v. PY

Operating Statistics(1)

TP

PY

Amt.

Pct.

Occupancy percentage

77.3

%

78.2

%

-0.9

pts

-1.2

%

ADR

$

153.54

$

150.00

$

3.54

2.4

%

RevPAR

$

118.70

$

117.35

$

1.35

1.2

%

(1)

These operating statistics represent averages of our comparable eight distinct company-owned hotels
and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics
are not necessarily representative of any particular hotel or resort.

RevPAR increased at
six of our eight comparable company-owned properties during the Transition Period compared to the prior year comparable period.
According to data received from Smith Travel Research and compiled by us in order to analyze our Transition Period results, comparable
“upper upscale” hotels throughout the United States experienced an increase in RevPAR of 3.6% during the Transition
Period. Data received from Smith Travel Research for our various “competitive sets” – hotels identified in our
specific markets that we deem to be competitors to our hotels – indicates that these hotels experienced an increase in RevPAR
of 3.1% during the Transition Period. We believe our RevPAR increases during the Transition Period do not match the United States
results and competitive set results because of room supply growth in certain of our markets, the fact that our properties are predominately
in Midwestern markets that have not experienced the greater ADR increases prevalent in larger cities in other areas of the country,
and particularly difficult comparisons during the first quarter of our Transition Period. The following table sets forth the change
in our average occupancy percentage, ADR and RevPAR for each interim period of the Transition Period. For comparison purposes,
all statistics exclude the Hotel Phillips and the additional week of operations:

Change TP v. PY

1st Qtr.

2nd Qtr.

5 Weeks

Occupancy percentage

-3.3

pts

-0.8

pts

0.9

pts

ADR

2.9

%

3.4

%

0.7

%

RevPAR

-1.0

%

2.4

%

2.4

%

We believe our RevPAR
increase during the Transition Period compared to the prior year comparable period was negatively impacted by reduced occupancy
from our group business customer segment in the first quarter of the Transition Period. We believe the reduced group occupancy,
primarily at two of our more group-oriented hotels, was related to difficult comparisons to the prior year during the months of
June and July at those particular properties. We base that conclusion on the fact that our overall business improved significantly
later in the summer and into the remaining months of the Transition Period.

An increase in our
ADR offset our occupancy percentage declines during the Transition Period compared to the comparable prior year period. We believe
one of the best ways to increase our operating margins is to increase our ADR, and we continued to actively pursue that strategy
during the Transition Period, even at the expense of reduced occupancy percentages in some cases. Our rebranded AC Hotel Chicago
Downtown is an example of this strategy, as we continued to see significant increases in ADR at that property during the Transition
Period. In addition, during the Transition Period, we made a decision at our largest revenue property, the Grand Geneva Resort
& Spa, to focus on growing total hotel revenues through bookings that generate a higher ancillary spend, meaning that we sacrificed
some room revenue dollars to achieve higher total spend throughout the resort. This particular strategy contributed to our increase
in food and beverage revenues during the Transition Period compared to the prior year comparable period. Five of our eight comparable
company-owned and operated hotels reported increased ADR during the Transition Period compared to the prior year comparable period.

61

The lodging industry
continued to generally perform at a steady pace during the Transition Period. With the exception of group business during the first
two months of the Transition Period described above, all major segments of our customer base – leisure travel, non-group
business travel and group – remained relatively strong. As noted previously, leisure customers tend to be very loyal to online
travel agencies, which is one of the reasons why we continued to experience some rate pressure.

During the first quarter
of the Transition Period, we purchased the SafeHouse in Milwaukee, Wisconsin, adding another restaurant to our portfolio.
The addition of this spy-themed Milwaukee restaurant to our operating results contributed to our increased food and beverage revenues
during the Transition Period.

Fiscal
2015 versus Fiscal 2014

Our hotels and resorts
division revenues increased during fiscal 2015 compared to the prior year due primarily to higher occupancy rates at our comparable
hotels and an increase in food and beverage revenues during fiscal 2015 compared to the prior year. Conversely, hotels and resorts
division operating income during fiscal 2015 was negatively impacted by increased depreciation and a $2.6 million impairment charge
related to one specific hotel. In addition, the removal of our former Four Points by Sheraton brand at our downtown Chicago hotel
and commencement of a major renovation to convert this hotel into one of the first AC Hotels by Marriott in the United States resulted
in disruption in room reservations and rooms out of service during the last three quarters of fiscal 2015, contributing to our
overall reduced operating income during fiscal 2015.

These operating statistics represent averages of our comparable nine distinct company-owned hotels
and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics
are not necessarily representative of any particular hotel or resort.

RevPAR increased at
seven of our nine comparable company-owned properties during fiscal 2015 compared to the prior year. Excluding our Chicago hotel,
which experienced significant disruption during its major renovation, RevPAR increased 5.9% during fiscal 2015 compared to the
prior year. According to data received from Smith Travel Research and compiled by us in order to analyze our fiscal year results,
comparable “upper upscale” hotels throughout the United States experienced an increase in RevPAR of 6.9% during our
fiscal 2015. We believe our RevPAR increases during fiscal 2015 do not match the United States results because our properties are
predominately in Midwestern markets that have not experienced the higher ADR increases more prevalent in larger cities in other
areas of the country, such as New York and San Francisco. In fact, data received from Smith Travel Research for our various “competitive
sets” – hotels identified in our specific markets that we deem to be competitors to our hotels – indicates that
these hotels experienced an increase in RevPAR of 5.3% during our fiscal 2015. Based upon that data, and excluding our Chicago
hotel, our hotels collectively outperformed their respective markets during fiscal 2015. Room demand continued to be strong overall,
but inconsistent demand from the group business segment and the onset of construction at our Chicago hotel during the second quarter
of fiscal 2015 contributed to variations in our results by quarter, as evidenced by the table below:

62

Change F15 v. F14

1st Qtr.

2nd Qtr.

3rd Qtr.

4th Qtr.

Occupancy percentage

3.7

pts

3.6

pts

1.4

pts

1.9

pts

ADR

1.9

%

-0.5

%

-0.6

%

1.8

%

RevPAR

6.5

%

4.3

%

1.8

%

3.3

%

The lodging industry
continued to recover at a steady pace during our fiscal 2015. Our overall occupancy rates again showed improvement during fiscal
2015 compared to the prior year and, in fact, continued to be at record levels for this division, significantly higher than they
were prior to the recession-driven downturn in the hotel industry. However, one of the biggest challenges facing our hotels and
resorts division, and the industry as a whole, has been the overall decline in ADR compared to pre-recession levels, particularly
in our geographic markets. Our ADR during fiscal 2015 was still approximately 2.4% below pre-recession fiscal 2008 levels. We believe
our ADR decreases during the second and third quarters of fiscal 2015 and relatively small overall increase in ADR during fiscal
2015 resulted from several factors, including the removal of our brand at our Chicago hotel for the last two quarters of the year,
a conscious decision to spur demand at several of our winter-weather affected properties by lowering ADR during our third quarter,
and the impact of increased supply in our Milwaukee, Wisconsin and Oklahoma City, Oklahoma markets.

Leisure travel remained
strong during fiscal 2015, although leisure customers tend to be very loyal to online travel agencies, which is one of the reasons
why we continued to experience rate pressure. Non-group business travel was also strong during fiscal 2015. Group business continued
to be the customer segment experiencing the slowest recovery during fiscal 2015. However, strong group business during the first
quarter of fiscal 2015 contributed to our 8%-9% increases in ADR at selected hotels compared to the prior-year first quarter.

The above-described
change in our RevPAR mix had the effect of limiting our ability to rapidly increase our operating margins during the ongoing United
States economic recovery. Operating costs traditionally increase as occupancy increases, which usually negatively impacts our operating
margins until we begin to also achieve significant improvements in our ADR.

Liquidity
and Capital Resources

Liquidity

Our theatre and hotels
and resorts divisions each generate significant and relatively consistent daily amounts of cash, subject to seasonality described
above, because each segment’s revenue is derived predominantly from consumer cash purchases. We believe that these relatively
consistent and predictable cash sources, as well as the availability of $91 million of unused credit lines at the end of fiscal
2017, are adequate to support the ongoing operational liquidity needs of our businesses during fiscal 2018.

On June 16, 2016, we
entered into a five-year, $225 million credit agreement among us and several banks, including JPMorgan Chase Bank, N.A., as Administrative
Agent, and U.S. Bank National Association, as Syndication Agent (the “Credit Agreement”). The Credit Agreement provides
for a revolving credit facility that matures on June 16, 2021 with an initial maximum aggregate amount of availability of $225
million. Availability under the revolving credit facility is reduced by outstanding commercial paper borrowings (none as of December
28, 2017) and outstanding letters of credit ($3.7 million as of December 28, 2017). We may request to increase the aggregate amount
of the revolving credit facility and/or term loan commitments under the Credit Agreement, including by the addition of one or more
tranches of term loans, by an aggregate amount of up to $75 million, subject to certain conditions, which include, among other
things, the absence of any default or event of default under the Credit Agreement.

63

Under the Credit Agreement,
we have agreed to pay a facility fee, payable quarterly, equal to 0.15% to 0.25% of the total commitment, depending on our consolidated
debt to total capitalization ratio, as defined in the Credit Agreement. Borrowings under the revolving credit facility bear interest,
payable no less frequently than quarterly, at a rate equal to (a) LIBOR plus a specified margin between 0.85% and 1.375% (based
on our consolidated debt to total capitalization ratio) or (b) an alternate base rate (which is the greatest of (i) the Administrative
Agent’s prime rate, (ii) the federal funds rate plus 0.50% or (iii) the sum of 1% plus one-month LIBOR) plus a margin (based
upon our consolidated debt to capitalization ratio) specified in the Credit Agreement.

The Credit Agreement
contains various restrictions and covenants applicable to The Marcus Corporation and certain of our subsidiaries. Among other requirements,
the Credit Agreement limits the amount of priority debt (as defined in the Credit Agreement) held by our restricted subsidiaries
to no more than 20% of our consolidated total capitalization (as defined in the Credit Agreement), limits our permissible consolidated
debt to total capitalization ratio to a maximum of 0.55 to 1.0 and requires us to maintain a minimum fixed charge coverage ratio
(consolidated adjusted cash flow to consolidated interest and rental expense) of 3.0 to 1.0, as defined in the Credit Agreement.

As of December 28,
2017, we were in compliance with the financial covenants set forth in the Credit Agreement. As of December 28, 2017, our consolidated
debt to total capitalization ratio was 0.41 and our fixed charge coverage ratio was 5.9. We expect to be able to meet the financial
covenants contained in the Credit Agreement during the remainder of fiscal 2018.

On December 21, 2016,
we entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with the several purchasers party to the
Note Purchase Agreement, pursuant to which we issued and sold $50 million in aggregate principal amount of our 4.32% Senior Notes
due February 22, 2027 (the “Notes”) in a private placement exempt from the registration requirements of the Securities
Act of 1933, as amended. The sale and purchase of the Notes occurred on February 22, 2017. We used the net proceeds of the sale
of the Notes to repay outstanding indebtedness and for general corporate purposes.

Interest on the Notes
is payable semi-annually in arrears on the twenty-second day of February and August in each year and at maturity, commencing on
August 22, 2017. The entire outstanding principal balance of the Notes will be due and payable on February 22, 2027.

The Note Purchase Agreement
contains various restrictions and covenants applicable to The Marcus Corporation and certain of our subsidiaries. Among other requirements,
the Note Purchase Agreement limits the amount of priority debt (as defined in the Note Purchase Agreement) for which we or our
restricted subsidiaries are obligated to 20% of consolidated total capitalization (as defined in the Note Purchase Agreement),
limits consolidated debt (as defined in the Note Purchase Agreement) to 65% of consolidated total capitalization (as defined in
the Note Purchase Agreement) and requires us to maintain a minimum ratio of consolidated operating cash flow (as defined in the
Note Purchase Agreement) to fixed charges (as defined in the Note Purchase Agreement) for each period of four consecutive fiscal
quarters (determined as of the last day of each fiscal quarter) of 2.50 to 1.00.

As of December 28,
2017, the ratio of: (a) consolidated debt (as defined in the Note Purchase Agreement) to consolidated total capitalization (as
defined in the Note Purchase Agreement) was 0.41; and (b) consolidated operating cash flow (as defined in the Note Purchase Agreement)
to fixed charges (as defined in the Note Purchase Agreement) was 6.0. We expect to be able to meet the financial covenants contained
in the Note Purchase Agreement during fiscal 2018.

The majority of our
other long-term debt consists of senior notes and mortgages with annual maturities of $12.0 million and $10.0 million in fiscal
2018 and 2019, respectively. A $24.2 million mortgage due in 2017 was replaced with a new $15.0 million mortgage and borrowings
under our revolving credit facility in January 2017. A $16.1 million mortgage due in 2017 was extended in December 2017. The senior
notes impose various financial covenants applicable to The Marcus Corporation and certain of our subsidiaries. As of December 28,
2017, we were in compliance with all of the financial covenants imposed by the senior notes, and we expect to be able to meet the
financial covenants imposed by the senior notes during fiscal 2018.

64

Financial
Condition

Fiscal
2017 versus Fiscal 2016

Net cash provided by
operating activities totaled $109.0 million during fiscal 2017 compared to $82.7 million during fiscal 2016, an increase of $26.3
million, or 31.9%. The increase in net cash provided by operating activities was due primarily to increased net earnings and depreciation
and amortization and the favorable timing in the payment of accounts payable, taxes other than income and other accrued liabilities,
partially offset by a reduction in deferred taxes, the unfavorable timing in the collection of accounts and notes receivable and
in the payment of income taxes and accrued compensation.

Net cash used in
investing activities during fiscal 2017 totaled $100.2 million compared to $128.6 million during fiscal 2016, a decrease of
$28.4 million, or 22.0%. The decrease in net cash used in investing activities was primarily the result of the purchase of
the Wehrenberg theatres during fiscal 2016, partially offset by increased capital expenditures during fiscal 2017 compared to
fiscal 2016. Increased proceeds from the disposals of property, equipment and other assets and the sale of interests in joint
ventures during fiscal 2017 were offset by a significantly smaller decrease in restricted cash during fiscal 2017 compared to
fiscal 2016. When we sold the Hotel Phillips in October 2015, the majority of the cash proceeds were held by an intermediary
in conjunction with an anticipated Internal Revenue Code §1031 like-kind exchange, where we planned to subsequently
purchase other real estate to defer the related tax gain on the sale of the hotel. During fiscal 2016, we successfully
reinvested the proceeds in additional real estate within the prescribed time period, and we received the cash held by the
intermediary, which resulted in a significant reduction of restricted cash. Proceeds from disposals of property, equipment
and other assets of $4.5 million and sale of interests in joint ventures of $6.7 million during fiscal 2017 included proceeds
from the sale of two hotel joint ventures, two former theatres, two parcels of excess land at theatre locations and our
interest in Movietickets.com. We also sold a partial interest in a joint venture during fiscal 2016 (the Hotel Zamora, St.
Pete Beach, Florida), which reduced our net cash used in investing activities during fiscal 2016.

Total cash capital
expenditures (including normal continuing capital maintenance and renovation projects) totaled $114.8 million during fiscal 2017
compared to $83.6 million during fiscal 2016, an increase of $31.2 million, or 37.3%. We incurred capital expenditures of $23.8
million and $27.9 million, respectively, during fiscal 2017 and fiscal 2016 related to real estate purchases and development costs
of three new theatres, one of which opened during the fourth quarter of fiscal 2016 and two of which opened during fiscal 2017.
We did not incur any capital expenditures related to developing new hotels during either period. We incurred approximately $93.7
million and $68.8 million, respectively, of capital expenditures during fiscal 2017 and fiscal 2016 in our theatre division, including
the aforementioned costs associated with constructing new theatres, as well as costs associated with the addition of DreamLounger
recliner seating, our Take Five Lounge, Zaffiro’s Express and Reel Sizzle food and beverage concepts,
and UltraScreen DLX and SuperScreen DLX premium large format screens at selected theatres, each as described in the
“Current Plans” section of this MD&A. We incurred approximately $20.6 million of capital expenditures in our hotels
and resorts division during fiscal 2017, including costs associated with the development of our new SafeHouse Chicago location,
our development of new villas at the Grand Geneva Resort & Spa described above and various maintenance capital projects at
our owned hotels and resorts. During fiscal 2016, we incurred approximately $14.7 million of capital expenditures in our hotels
and resorts division, including costs associated with the renovation of The Skirvin Hilton and SafeHouse Milwaukee, expansion
of WHLS and development of our new SafeHouse Chicago, as well as other maintenance capital projects at our company-owned
hotels and resorts. As described above, we incurred acquisition-related capital expenditures in our theatre division of $63.8 million
during fiscal 2016 (purchase price of $65.0 million, net of a negative working capital balance that we assumed in the transaction).
We did not incur any acquisition-related capital expenditures in our theatre division during fiscal 2017. Our current estimated
fiscal 2018 capital expenditures, which we anticipate may be in the $65-$80 million range, are described in greater detail in the
“Current Plans” section of this MD&A.

65

Net cash provided by
financing activities during fiscal 2017 totaled $4.2 million compared to $42.5 million during fiscal 2016. The decrease in net
cash provided by financing activities related primarily to a decrease in our net borrowings on our credit facility during fiscal
2017 compared to fiscal 2016, partially offset by a net increase in our long-term debt during fiscal 2017 compared to a net decrease
in long-term debt during fiscal 2016.

We received proceeds
from the issuance of long-term debt totaling $65.0 million during fiscal 2017, including the proceeds from our issuance of the
Notes. In addition, we repaid a mortgage note that matured in January 2017 with a balance of $24.2 million as of December 29, 2016
during fiscal 2017 and replaced it with borrowings under our revolving credit facility and the issuance of a $15.0 million mortgage
note bearing interest at LIBOR plus 2.75%, requiring monthly principal and interest payments and maturing in fiscal 2020. We made
principal payments on long-term debt totaling $36.3 million during fiscal 2017 (including the mortgage note repayment described
above) compared to payments of $52.3 million during fiscal 2016. Fiscal 2016 repayments included our repayment of a $37.2 million
term loan from our prior credit agreement.

We used excess cash
during fiscal 2017 and fiscal 2016 to reduce our borrowings under our revolving credit facility. As short-term borrowings became
due, we replaced them as necessary with new short-term borrowings. In conjunction with the execution of our Credit Agreement in
June 2016, we also paid all outstanding borrowings under our prior revolving credit facility and replaced them with borrowings
under our new revolving credit facility. We also used borrowings under our revolving credit facility to fund the Wehrenberg acquisition
during fiscal 2016 prior to the issuance of the senior notes described above during fiscal 2017. As a result, we added $322.0 million
of new short-term borrowings and we made $332.0 million of repayments on short-term borrowings during fiscal 2017 (net decrease
in borrowings on our credit facility of $10.0 million) compared to $346.2 million of new short-term borrowings and $236.2 million
of repayments on short-term borrowings made during fiscal 2016 (net increase in net borrowings on our credit facility of $110.0
million), accounting for the decrease in net cash provided by financing activities during fiscal 2017.

Our debt-to-capitalization
ratio (excluding our capital lease obligations) was 0.40 at December 28, 2017 compared to 0.42 at December 29, 2016. Based upon
our current expectations for our fiscal 2018 capital expenditures, we anticipate that our total long-term debt and debt-to-capitalization
ratio at the end of our fiscal 2018 may decrease slightly from that as of December 28, 2017. Our actual total long-term debt and
debt-to-capitalization ratio at the end of fiscal 2018 are dependent upon, among other things, our actual operating results, capital
expenditures, potential acquisitions, asset sales proceeds and potential equity transactions during the year.

We repurchased approximately
29,000 shares of our common stock for approximately $850,000 in conjunction with the exercise of stock options during fiscal 2017.
We repurchased approximately 334,000 shares of our common stock for approximately $6.4 million in conjunction with the exercise
of stock options and the purchase of shares in the open market during fiscal 2016. As of December 28, 2017, approximately 2.9 million
shares of our common stock remained available for repurchase under prior Board of Directors repurchase authorizations. Under these
authorizations, we may repurchase shares of our common stock from time to time in the open market, pursuant to privately-negotiated
transactions or otherwise, depending upon a number of factors, including prevailing market conditions.

We paid regular quarterly
dividends totaling $13.5 million and $12.0 million, respectively, during fiscal 2017 and fiscal 2016. During the first quarter
of fiscal 2017, we increased our regular quarterly common stock cash dividend by 11.1% to $0.125 per common share. During the first
quarter of fiscal 2018, we increased our regular quarterly common stock cash dividend by an additional 20.0% to $0.15 per common
share. During fiscal 2017 and fiscal 2016, we made distributions to noncontrolling interests of $20,000 and $448,000, respectively.

66

Fiscal
2016 versus Fiscal 2015C

Net cash provided by
operating activities totaled $82.7 million during fiscal 2016 compared to $89.5 million during fiscal 2015C, a decrease of $6.8
million, or 7.6%. The decrease in net cash provided by operating activities was due primarily to unfavorable timing of the payment
of income taxes, taxes other than income taxes and other accrued liabilities and collection of other current assets, partially
offset by increased net earnings and the favorable timing of the collection of accounts and notes receivable and payment of accrued
compensation.

Net cash used in investing
activities during fiscal 2016 totaled $128.6 million compared to $79.8 million during fiscal 2015C, an increase of $48.8 million,
or 61.0%. The increase in net cash used in investing activities was primarily the result of the purchase of Wehrenberg during fiscal
2016. Reduced proceeds from the disposals of property, equipment and other assets during fiscal 2016 were offset by a decrease
in restricted cash during fiscal 2016 compared to fiscal 2015C. When we sold the Hotel Phillips in October 2015, the majority of
the cash proceeds were held by an intermediary in conjunction with an anticipated Internal Revenue Code §1031 like-kind exchange,
where we planned to subsequently purchase other real estate to defer the related tax gain on the sale of the hotel. During fiscal
2016, we successfully reinvested the proceeds in additional real estate within the prescribed time period, and we received the
cash held by the intermediary, which resulted in a reduction of restricted cash. We also sold a partial interest in a joint venture
during fiscal 2016 (the Hotel Zamora, St. Pete Beach, Florida), reducing our net cash used in investing activities during fiscal
2016.

Total cash capital
expenditures (including normal continuing capital maintenance and renovation projects) totaled $83.6 million during fiscal 2016
compared to $84.6 million during fiscal 2015C, a decrease of $1.0 million, or 1.1%. We incurred capital expenditures of $27.9
million during fiscal 2016 related to real estate purchases and development costs of three new theatres, one of which opened during
the fourth quarter of fiscal 2016 and two of which are currently under construction. Approximately $14.6 million of our capital
expenditures during fiscal 2015C were related to the development of a new theatre that opened in May 2015. We did not incur any
capital expenditures related to developing new hotels during either period. We incurred approximately $68.8 million and $57.3
million, respectively, of capital expenditures during fiscal 2016 and fiscal 2015C in our theatre division, including the aforementioned
costs associated with constructing new theatres, as well as costs associated with the addition of DreamLounger recliner seating,
our Take Five Lounge, Zaffiro’s Express, Reel Sizzle and Big Screen Bistro food and beverage
concepts, and UltraScreen DLX and SuperScreen DLX premium large format screens at selected theatres, each as described
in the “Current Plans” section of this MD&A. We incurred approximately $14.7 million of capital expenditures in our hotels and
resorts division during fiscal 2016, including costs associated with the renovation of The Skirvin Hilton and SafeHouse
Milwaukee, expansion of WHLS and development of our new SafeHouse Chicago, as well as other maintenance capital projects
at our company-owned hotels and resorts. During fiscal 2015C, we incurred approximately $26.9 million of capital expenditures
in our hotels and resorts division, including costs associated with the completion of the conversion of our Chicago hotel into
an AC Hotel by Marriott, the commencement of our renovation of The Skirvin Hilton, and our acquisition of the SafeHouse
Milwaukee, as well as other maintenance capital projects at our company-owned hotels and resorts. As described above, we incurred
acquisition-related capital expenditures in our theatre division of $63.8 million during fiscal 2016 (purchase price of $65.0
million, net of a negative working capital balance that we assumed in the transaction). We did not incur any acquisition-related
capital expenditures in our theatre division during fiscal 2015C.

Net cash provided by
financing activities during fiscal 2016 totaled $42.5 million compared to net cash used in financing activities of $21.6 million
during fiscal 2015C. The increase in net cash provided by financing activities related primarily to an increase in our net borrowings
on our credit facility during fiscal 2016 compared to fiscal 2015C, partially offset by an increase in principal payments on long-term
debt, share repurchases and dividends paid during fiscal 2016 compared to fiscal 2015C.

67

We used excess cash
during fiscal 2016 and fiscal 2015C to reduce our borrowings under our revolving credit facility. As short-term borrowings became
due, we replaced them as necessary with new short-term borrowings. In conjunction with the execution of our new Credit Agreement
in June 2016, we also paid all outstanding borrowings under our old revolving credit facility and replaced them with borrowings
under our new revolving credit facility. We also used borrowings under our revolving credit facility to fund the Wehrenberg acquisition.
As a result, we added $346.2 million of new short-term borrowings and we made $236.2 million of repayments on short-term borrowings
during fiscal 2016 (net increase in borrowings on our credit facility of $110.0 million) compared to $198.0 million of new short-term
borrowings and $202.0 million of repayments on short-term borrowings made during fiscal 2015C (net decrease in net borrowings on
our credit facility of $4.0 million), accounting for the majority of the increase in net cash provided by financing activities
during fiscal 2016. We made $52.3 million of principal payments on long-term debt during fiscal 2016, including our repayment of
a $37.2 million term loan from our prior credit agreement, compared to principal payments of $8.1 million during fiscal 2015C.

Our debt-to-capitalization
ratio (excluding our capital lease obligations) was 0.42 at December 29, 2016 compared to 0.38 at the end of fiscal 2015C.

We repurchased approximately
334,000 shares of our common stock for approximately $6.4 million in conjunction with the exercise of stock options and the purchase
of shares in the open market during fiscal 2016. We repurchased approximately 55,000 shares of our common stock for approximately
$1.1 million in conjunction with the exercise of stock options during fiscal 2015C.

We paid regular quarterly
dividends totaling $12.0 million and $11.0 million, respectively, during fiscal 2016 and fiscal 2015C. During the first quarter
of fiscal 2016, we increased our regular quarterly common stock cash dividend by 7.1% to $0.1125 per common share. During fiscal
2016 and fiscal 2015C, we made distributions to noncontrolling interests of $448,000 and $505,000, respectively.

Transition
Period versus Prior Year Comparable Period

Net cash provided by
operating activities totaled $66.8 million during the Transition Period compared to $55.0 million during the prior year comparable
30-week period, an increase of $11.8 million, or 21.4%. The increase in net cash provided by operating activities was due primarily
to increased net earnings, increased depreciation and amortization, and the favorable timing of the collection of accounts and
notes receivable and payment of income taxes and other accrued liabilities, partially offset by a decrease in deferred income taxes
and deferred compensation and other, and the unfavorable timing of the payment of accounts payable and accrued compensation.

Net cash used in investing
activities during the Transition Period totaled $40.8 million compared to $36.0 million during the prior year comparable period,
an increase of $4.8 million, or 13.6%. The increase in net cash used in investing activities was primarily the result of an increase
in capital expenditures, partially offset by an increase in proceeds from disposals of property, equipment and other assets, net
of proceeds held by an intermediary during the Transition Period. Proceeds from the disposal of property, equipment and other assets
of $14.0 million during the Transition Period related primarily to the sale of the Hotel Phillips and a former theatre location.
A portion of the proceeds from the sale of the Hotel Phillips were held by an intermediary in conjunction with an expected Internal
Revenue Code §1031 tax-deferred like-kind exchange transaction during fiscal 2016. We also purchased an interest in a joint
venture during the Transition Period (the Omaha Marriott Downtown at The Capitol District hotel, Omaha, Nebraska) and during the
prior year comparable period (the Hotel Zamora, St. Pete Beach, Florida) that contributed to our net cash used in investing activities
during both periods.

68

Total cash
capital expenditures (including normal continuing capital maintenance and renovation projects) totaled $44.5 million during
the Transition Period compared to $33.9 million during the prior year comparable period, an increase of $10.6 million, or
31.3%. We incurred capital expenditures of $3.2 million and $4.1 million, respectively, related to the development of a new
theatre during the Transition Period and prior year comparable period. We did not incur any capital expenditures related to
developing new hotels during either period. We incurred approximately $28.0 million and $21.0 million, respectively, of
capital expenditures during the Transition Period and prior year comparable period in our theatre division, including the
aforementioned costs associated with constructing a new theatre in Sun Prairie, Wisconsin, as well as costs associated with
the addition of DreamLounger recliner seating, our Take Five Lounge, Zaffiro’s Express and Big Screen
Bistro food and beverage concepts, and UltraScreen DLX, SuperScreen DLX and UltraScreen premium
large format screens at selected theatres, each as described in the “Current Plans” section of this MD&A. We
incurred approximately $13.4 million of capital expenditures in our hotels and resorts division during the Transition Period,
including costs associated with the completion of the conversion of our Chicago hotel into an AC Hotel by Marriott and our
acquisition of the SafeHouse, as well as other maintenance capital projects at our company-owned hotels and resorts.
During the prior year comparable period, we incurred approximately $11.8 million of capital expenditures in our hotels and
resorts division, including costs associated with the completion of the fiscal 2014 renovation of the tower guest rooms of
The Pfister Hotel in Milwaukee, Wisconsin, completion of the renovation of The Lincoln Marriott Cornhusker Hotel in
Lincoln, Nebraska, and the commencement of the conversion of our Chicago hotel into an AC Hotel by Marriott, as well as other
maintenance capital projects at our company-owned hotels and resorts. We did not incur any acquisition-related capital
expenditures in our theatre division during the Transition Period or the prior year comparable period.

Net cash used in financing
activities during the Transition Period totaled $26.0 million compared to $7.1 million during the prior year comparable period,
an increase of $18.9 million. The increase in net cash used in financing activities related primarily to a decrease in our net
borrowings on our credit facility during the Transition Period compared to the prior year comparable period and a slight increase
in dividends paid.

We used excess cash
during the Transition Period and prior year comparable period to reduce our borrowings under our revolving credit facility. As
short-term borrowings became due, we replaced them as necessary with new short-term borrowings. As a result, we added $108.5 million
of new short-term borrowings and we made $126.5 million of repayments on short-term borrowings during the Transition Period (net
decrease in borrowings on our credit facility of $18.0 million) compared to $80.0 million of new short-term borrowings and $80.0
million of repayments on short-term borrowings made during the prior year comparable period (no change in net borrowings on our
credit facility), accounting for the majority of the increase in net cash used in financing activities during the Transition Period.
Principal payments on long-term debt were $3.3 million during the Transition Period compared to payments of $2.4 million during
the prior year comparable period.

Our debt-to-capitalization
ratio (excluding our capital lease obligation related to digital cinema projection systems) was 0.38 at December 31, 2015 compared
to 0.42 at the end of fiscal 2015.

We repurchased approximately
3,700 and 3,000 shares of our common stock in conjunction with the exercise of stock options during the Transition Period and prior
year comparable period, respectively.

We paid regular quarterly
dividends totaling $5.6 million and $5.1 million, respectively, during the Transition Period and prior year comparable period.
We increased our regular quarterly common stock cash dividend by 10.5% during the fourth quarter of fiscal 2015 to $0.105 per common
share. During the Transition Period and prior year comparable period, we made distributions to noncontrolling interests of $505,000
and $959,000, respectively.

Fiscal
2015 versus Fiscal 2014

Net cash provided by
operating activities totaled $80.5 million during fiscal 2015 compared to $66.4 million during fiscal 2014, an increase of $14.1
million, or 21.1%. The increase in net cash provided by operating activities was due primarily to increased net earnings, increased
depreciation and amortization, deferred income taxes and deferred compensation and other, and the favorable timing of the payment
of accounts payable and income taxes, partially offset by unfavorable timing of the payment of other accrued liabilities and the
collection of accounts and notes receivable.

69

Net cash used in investing
activities during fiscal 2015 totaled $78.2 million compared to $57.7 million during fiscal 2014, an increase of $20.5 million,
or 35.5%. The increase in net cash used in investing activities was primarily the result of an increase in capital expenditures,
partially offset by a decrease in proceeds from disposals of property, equipment and other assets and a decrease in other assets.
We also purchased an interest in a joint venture (the Hotel Zamora) during fiscal 2015 that contributed to our increased net cash
used in investing activities during fiscal 2015. Proceeds from the disposal of property, equipment and other assets of $1.9 million
during fiscal 2014 related primarily to the sale of two theatre outlots and the sale of our interest in a hotel joint venture.

Total cash
capital expenditures (including normal continuing capital maintenance and renovation projects) totaled $75.0 million during
fiscal 2015 compared to $56.7 million during fiscal 2014, an increase of $18.3 million, or 32.3%. We incurred capital
expenditures of $15.5 million and $3.2 million, respectively, related to the development of a new theatre during fiscal 2015
and fiscal 2014. We did not incur any capital expenditures related to developing new hotels during fiscal 2015 or fiscal
2014. We incurred approximately $49.8 million and $38.0 million, respectively, of capital expenditures during fiscal 2015 and
fiscal 2014 in our theatre division, including the aforementioned costs associated with constructing a new theatre in Sun
Prairie, Wisconsin, as well as costs associated with the addition of DreamLounger recliner seating, our Take Five
Lounge, Zaffiro’s Express and Big Screen Bistro food and beverage concepts, and UltraScreen
DLX, SuperScreen DLX and UltraScreen premium large format screens at selected theatres, each as described in
the “Current Plans” section of this MD&A. We incurred approximately $23.6 million of capital expenditures in
our hotels and resorts division during fiscal 2015, including costs related to the conversion of our Chicago hotel into an AC
Hotel by Marriott and costs related to completing renovations at The Pfister Hotel and The Lincoln Marriott Cornhusker Hotel.
During fiscal 2014, we incurred approximately $18.5 million of capital expenditures in our hotels and resorts division,
including costs associated with renovations at The Lincoln Marriott Cornhusker Hotel and The Pfister Hotel, as well as other
maintenance capital projects at our company-owned hotels and resorts. We did not incur any acquisition-related
capital expenditures in our theatre division or hotels and resorts division during fiscal 2015 or fiscal 2014.

Net cash used in financing
activities in fiscal 2015 totaled $2.3 million compared to $12.1 million during fiscal 2014, a decrease of $9.8 million, or 80.7%.
The decrease in net cash used in financing activities related to an increase in our net debt proceeds during fiscal 2015 compared
to the prior year, a decrease in share repurchases and a decrease in distributions to noncontrolling interests, partially offset
by a decrease in the exercise of stock options and an increase in dividends paid.

We used excess cash
during fiscal 2015 and fiscal 2014 to reduce our borrowings under our revolving credit agreement. As short-term borrowings became
due, we replaced them as necessary with new short-term borrowings. We used the proceeds of our issuance and sale of senior notes
during fiscal 2014 to pay off borrowings under our revolving credit agreement. In addition, we paid off an existing mortgage on
our Chicago hotel at the end of fiscal 2014 with borrowings under our credit agreement. As a result, we added $162.5 million of
new short-term borrowings and we made $148.5 million of repayments on short-term borrowings during fiscal 2015 (a net increase
in borrowings on our credit facility of $14.0 million) compared to $92.5 million of new short-term borrowings and $115.5 million
of repayments on short-term borrowings during fiscal 2014 (a net decrease in borrowings on our credit facility of $23.0 million).
We had no proceeds from the issuance of long-term debt in fiscal 2015 compared to proceeds of $52.7 million during fiscal 2014,
including the sale and issuance of senior notes. Principal payments on long-term debt, which included the payment of current maturities
of senior notes and mortgages, were $7.2 million during fiscal 2015 compared to $31.9 million during fiscal 2014. We also incurred
$316,000 in debt issuance costs during fiscal 2014.

During fiscal 2015,
we repurchased 55,000 shares of our common stock for approximately $1.1 million in conjunction with the exercise of stock options.
During fiscal 2014, we repurchased 314,000 shares of our common stock for approximately $4.2 million in conjunction with the exercise
of stock options and the purchase of shares in the open market. We reduced the numbers of shares repurchased during fiscal 2015
due to increases in the price of our common stock.

We paid regular quarterly
dividends totaling $10.4 million and $9.2 million, respectively, during fiscal 2015 and fiscal 2014. We increased our regular quarterly
common stock cash dividend by 10.5% during the fourth quarter of fiscal 2015 to $0.105 per common share. During fiscal 2015 and
fiscal 2014, we made distributions to noncontrolling interests of $959,000 and $2.1 million, respectively.

The following schedule
details our contractual obligations at December 28, 2017 (in thousands):

Payments Due by Period

Total

Less Than 1 Year

1-3 Years

4-5 Years

After 5 Years

Long-term debt

$

301,829

$

12,016

$

34,384

$

151,977

$

103,452

Interest on fixed-rate long term debt(1)

43,548

6,739

11,647

9,819

15,343

Pension obligations

37,639

1,347

2,933

2,973

30,386

Operating lease obligations

121,080

11,426

20,015

17,798

71,841

Capital lease obligations

34,657

3,127

6,155

5,500

19,875

Construction commitments

2,505

2,505

-

-

-

Total contractual obligations

$

541,258

$

37,160

$

75,134

$

188,067

$

240,897

(1)

Interest on variable-rate debt obligations is excluded
due to significant variations that may occur in each year related to the amount of variable-rate debt and the accompanying interest
rate.

As of December 28,
2017, we had an additional capital lease obligation of $9.6 million related to digital cinema equipment. The maximum amount we
could be required to pay under this obligation is approximately $6.2 million per year until the obligation is fully satisfied.
We believe the possibility of making any payments on this obligation is remote. Additional detail describing this obligation is
included in Note 6 to our consolidated financial statements.

As of December 28,
2017, we had no additional material purchase obligations other than those created in the ordinary course of business related to
property and equipment, which generally have terms of less than 90 days. We had long-term obligations related to our employee benefit
plans, which are discussed in detail in Note 8 to our consolidated financial statements. We have not included uncertain tax obligations
in the table of contractual obligations set forth above due to uncertainty as to the timing of any potential payments.

As of December 28,
2017, we had approximately three years remaining on our office lease, which reflected the amendment and extension of the term of
the lease that we entered into on June 1, 2012.

As of December 28,
2017, we had no debt or lease guarantee obligations.

71

Quantitative
and Qualitative Disclosures About Market Risk

We are exposed to market
risk related to changes in interest rates, and we manage our exposure to this market risk by monitoring available financing alternatives.

Variable interest rate
debt outstanding as of December 28, 2017 was $144.9 million, carried an average interest rate of 2.8% and represented 47.9% of
our total debt portfolio. After adjusting for an outstanding swap agreement described below, variable interest rate debt outstanding
as of December 28, 2017 was $119.9 million, carried an average interest rate of 2.9% and represented 39.6% of our total debt portfolio.
Our earnings are affected by changes in short-term interest rates as a result of our borrowings under our revolving credit facility.
Based upon the interest rates in effect on our variable rate debt outstanding as of December 28, 2017, a 100 basis point increase
in market interest rates would increase our annual interest expense by $1.4 million.

Fixed interest rate
debt totaled $157.6 million as of December 28, 2017, carried an average interest rate of 4.6% and represented 52.1% of our total
debt portfolio. After adjusting for an outstanding swap agreement described below, fixed interest rate debt totaled $182.6 million
as of December 28, 2017, carried an average interest rate of 4.3% and represented 60.4% of our total debt portfolio. Fixed interest
rate debt included the following: senior notes bearing interest semiannually at fixed rates ranging from 4.02% to 6.55%, maturing
in fiscal 2018 through 2027; and fixed rate mortgages and other debt instruments bearing interest from 3.00% to 5.75%, maturing
in fiscal 2025 and 2042. The fair value of our fixed interest rate debt is subject to interest rate risk. Generally, the fair market
value of our fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. As of December
28, 2017, the fair value of our $129.1 million of senior notes was approximately $125.2 million. Based upon the respective rate
and prepayment provisions of our remaining fixed interest rate mortgage and unsecured term note at December 28, 2017, the carrying
amounts of such debt approximated fair value as of such date.

We periodically enter
into interest rate swap agreements to manage our exposure to interest rate changes. These swaps involve the exchange of fixed and
variable interest rate payments. Payments or receipts on the agreements are recorded as adjustments to interest expense. We had
one outstanding interest rate swap agreement at December 28, 2017 covering $25.0 million, expiring on January 22, 2018. Under this
swap agreement, we pay a defined fixed rate while receiving a defined variable rate based on LIBOR, effectively converting $25.0
million of our borrowing under our Credit Agreement to a fixed rate. The swap agreement did not materially impact our fiscal 2017
earnings and we do not expect it to have any material impact on our fiscal 2018 earnings.

Subsequent to
December 28, 2017, we entered into two interest rate swap agreements covering $50.0 million of floating rate debt which will
require us to pay interest at a defined fixed rate while receiving interest at a defined variable rate of one-month LIBOR.
The first swap has a notional amount of $25.0 million, expires on March 1, 2021 and has a fixed rate of 2.559%. The second
swap has a notional amount of $25.0 million, expires on March 1, 2023 and has a fixed rate of 2.687%. We anticipate that the
interest rates swaps will be considered effective for accounting purposes and will qualify as cash flow hedges. We do not
expect the interest rate swaps to have a material effect on earnings within the next 12 months.

Critical
Accounting Policies and Estimates

This MD&A is based
upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted
in the United States (GAAP). The preparation of our financial statements requires us to make estimates and judgments that affect
our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

72

On an on-going basis,
we evaluate our estimates associated with critical accounting policies. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.

We believe the following
critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial
statements.

·

We review long-lived assets, including fixed assets, goodwill and investments in joint
ventures, for impairment at least annually, or whenever events or changes in
circumstances indicate that the carrying amount of any such asset may not be recoverable. In assessing the recoverability
of these assets, we must make assumptions regarding the estimated future cash flows and other factors that a market
participant would make to determine the fair value of the respective assets. The estimate of cash flows is based upon, among
other things, certain assumptions about expected future operating performance and anticipated sales prices. Our estimates of
undiscounted cash flows are sensitive to assumed revenue growth rates and may differ from actual cash flows due to factors
such as economic conditions, changes to our business model or changes in our operating performance and anticipated sales
prices. For long-lived assets other than goodwill, if the sum of the undiscounted estimated cash flows (excluding interest)
is less than the current carrying value, we recognize an impairment loss, measured as the amount by which the carrying value
exceeds the fair value of the asset. During fiscal 2015, we recorded a before-tax impairment charge of $2.9 million related
to a hotel and several former theatre locations. This same impairment charge also impacted fiscal 2015C results.

·

Goodwill is tested for impairment at a reporting unit level, determined to be at an operating segment
level. When reviewing goodwill for impairment, we consider the amount of excess fair value over the carrying value of the reporting
unit, the period of time since the last quantitative test, and other factors to determine whether or not to first perform a qualitative
test. When performing a qualitative test, we assess numerous factors to determine whether it is more likely than not that the fair
value of our reporting unit is less than its carrying value. Examples of qualitative factors that we assess include our share price,
our financial performance, market and competitive factors in our industry, and other events specific to the reporting unit. If
we conclude that it is more likely than not that the fair value of our reporting unit is less than its carrying value, we perform
a two-step quantitative test by comparing the carrying value of the reporting unit to the estimated fair value. Primarily all of
our goodwill relates to our theatre segment. The fair value of our theatre reporting unit exceeded our carrying value for fiscal
2017, fiscal 2016, the Transition Period and fiscal 2015 by a substantial amount.

·

Depreciation expense is based on the estimated useful life of our assets. The life of the assets
is based on a number of assumptions, including cost and timing of capital expenditures to maintain and refurbish the asset, as
well as specific market and economic conditions. While management believes its estimates are reasonable, a change in the estimated
lives could affect depreciation expense and net income or the gain or loss on the sale of any of the assets.

Accounting
Changes

In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from
Contracts with Customers, a comprehensive new revenue recognition model that requires a company to recognize revenue to depict
the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be
entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with
Customers: Deferral of Effective Date, to defer the effective date of the new revenue recognition standard by one year. The
new standard is effective for us in fiscal 2018. The guidance may be adopted using either a full retrospective or modified retrospective
approach. We have selected the modified retrospective method for adoption of ASU No. 2014-09 and its related ASU amendments. Under
this method, we will recognize the cumulative effect of the changes in retained earnings at the date of adoption, but will not
restate prior periods.

We have performed a review of the requirements of ASU 2014-09 and its related ASUs. In preparation for adoption
of the new standard, we have reviewed our key revenue streams and related customer contracts and have applied the five-step model
of the standard to these revenue streams and compared the results to our current accounting practices. We believe that the adoption
of the new standard will primarily impact our accounting for our loyalty programs and ticketing surcharge revenue. While we do
not believe the adoption of ASU 2014-09 will have a material impact on our results of operations or cash flows, we do expect the
new guidance to impact our classification of revenue and related expenses. We currently expect the following impacts:

·

In accordance with the new guidance, the portion of Theatre admission revenues, Theatre
concession revenues and Food and beverage revenues attributable to loyalty points earned by customers will be deferred as a
reduction of
these
revenues
until reward
redemption. Through December 28, 2017, we recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in Advertising and marketing expense. We believe adoption of the standard will result in an immaterial reduction of Theatre
admission revenues and a corresponding immaterial increase in Theatre concession revenues with an offsetting increase in
other long-term liabilities based
upon
historical
customer
reward redemption patterns.

·

We currently record internet ticket fee revenues net of third-party commission or service
fees. In accordance with ASU 2014-09, we believe that we are the principal (as opposed to agent) in the arrangement with
third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, expect to recognize
ticket fee revenue based on a gross transaction price. This change will have the effect of increasing other revenues and other
operating expense but will have no impact on net earnings or cash flows from operations.

73

We
expect to record a one-time cumulative effect reduction to retained earnings of approximately $3,500,000 during the first quarter
of fiscal 2018 related to the adoption of ASU 2014-09.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842),
intended to improve financial reporting related to leasing transactions. ASU No. 2016-02 requires a lessee to recognize on the
balance sheet assets and liabilities for rights and obligations created by leased assets with lease terms of more than 12 months.
The new guidance will also require disclosures to help investors and other financial statement users better understand the amount,
timing and uncertainty of cash flows arising from the leases. These disclosures include qualitative and quantitative requirements,
providing additional information about the amounts recorded in the financial statements. The new standard is effective for us
in fiscal 2019 and early application is permitted. We are evaluating the effect that the guidance will have on our consolidated
financial statements and related disclosures.

In August 2016, the FASB issued ASU No.
2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments, which addresses
eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard is effective
for us beginning in fiscal 2018. The standard must be applied using a retrospective transition method for each period
presented. We do not believe the new standard will have a material effect on our consolidated financial statements or
related disclosures.

In November 2016, the FASB issued ASU
No. 2016-18, Statement of Cash Flows (Topic 230)- Restricted Cash. ASU No. 2016-18 requires that a statement of cash
flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as
restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included
with cash and cash equivalents when reconciling the beginning of period and ending of period total amount shown on the
statement of cash flows. The new standard is effective for us in fiscal 2018 and must be applied on a retrospective basis.
We reported a $967,000 and $12,553,000 investing cash inflow related to a change in restricted cash for the periods
ended December 28, 2017 and December 29, 2016, respectively. Subsequent to the adoption of ASU No. 2016-18, the change in
restricted cash would be excluded from the change in cash flows from investing activities and included in the change in total
cash, restricted cash and cash equivalents as reported in the statement of cash flows.

In January 2017, the FASB issued ASU No.
2017-01, Business Combinations (Topic 805) – Clarifying the Definition of a Business, which clarifies the definition
of a business with the objective of adding guidance and providing a more robust framework to assist reporting organizations with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard
is effective for us in fiscal 2018 and must be applied prospectively. We will evaluate the effect the new standard
will have on our consolidated financial statements prospectively as transactions occur.

In January 2017, the FASB issued ASU No.
2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment, which
eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities
should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting
unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting
unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative
impairment test is necessary. ASU No. 2017-04 is effective for us in fiscal 2020 and must be applied prospectively. We
do not believe the new standard will have a material effect on our consolidated financial statements.

74

In
February 2017, the FASB issued ASU No. 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial
Assets (Subtopic 610-20: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets). ASU No. 2017-05 clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance
nonfinancial asset” and defines the term “in-substance nonfinancial asset.” It also covers the transfer of nonfinancial
assets to another entity in exchange for a non-controlling ownership interest in that entity. The new guidance is effective for
interim and annual periods beginning after December 15, 2017. We do not believe that the adoption of the new standard will have
a material effect on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation –
Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit Cost. The
ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item as
other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit
cost are to be presented separately, in an appropriately titled line item outside of any subtotal of operating income or disclosed
in the footnotes. The standard also limits the amount eligible for capitalization to the service cost component. The standard
is effective for us in fiscal 2018. We recorded expenses of $1,712,000 and $1,519,000 in operating income for the periods ended
December 28, 2017 and December 29, 2016, respectively, that will be excluded from operating income upon the adoption of ASU No.
2017-07.

In May 2017, the FASB issued ASU No.
2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and
reduce both the diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation -
Stock Compensation. The amendments in this update provide guidance about which changes to the terms or conditions of a
share-based payment award require an entity to apply modification accounting. ASU No. 2017-09 is effective for us in fiscal
2018 and must be applied prospectively to an award modified on or after the adoption date. We do not believe the
new standard will have a material effect on our consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities,
which amends the hedge accounting recognition and presentation requirements in Accounting Standards Codification 815, Derivatives
and Hedging (Topic 815). ASU No. 2017-12 is designed to improve the transparency and understandability of information about
an entity’s risk management activities and to reduce the complexity of and simplifying the application of hedge accounting.
ASU No 2017-12 is effective for us in fiscal 2019 and early adoption is permitted. We do not believe the new
standard will have a material effect on our consolidated financial statements.

75

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

The information required
by this item is set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
– Quantitative and Qualitative Disclosures About Market Risk” above.

Item 8.

Financial Statements and Supplementary Data.

MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING

Our management is responsible
for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)
of the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework (2013),
our management concluded that our internal control over financial reporting was effective as of December 28, 2017. The Company’s
auditors, Deloitte & Touche LLP, have issued an attestation report on our internal control over financial reporting. That attestation
report is set forth in this Item 8.

Gregory S. Marcus
President and Chief Executive Officer

Douglas A. Neis
Chief Financial Officer and Treasurer

76

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Marcus
Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets
of The Marcus Corporation and subsidiaries (the "Company") as of December 28, 2017 and December 29, 2016 and the related
consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows for each of the two years in the
period ended December 28, 2017, the 31 week period ended December 31, 2015 and for the year ended May 28, 2015, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 28, 2017 and December 29, 2016, and the results
of its operations and its cash flows for each of the two years in the period ended December 28, 2017, the 31 week period ended
December 31, 2015 and for the year ended May 28, 2015, in conformity with accounting principles generally accepted in the United
States of America.

We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control
over financial reporting as of December 28, 2017, based on the criteria established in Internal Control — Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 13, 2018, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of
the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin

March 13, 2018

We have served as the Company's auditor since 2008.

77

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Marcus
Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting
of The Marcus Corporation and subsidiaries (the "Company") as of December 28, 2017, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 28, 2017, based on the criteria established in Internal Control — Integrated Framework (2013)
issued by COSO.

We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December
28, 2017 of the Company and our report dated March 13, 2018, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial
Reporting

A company’s internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.